The National Stock Exchange of India (NSE) has made stricter rules for what kind of stocks can be used as collateral. This will affect borrowing money for trading purposes.
What is collateral? Collateral is a security that a borrower gives to a lender to secure a loan. If the borrower defaults on the loan, the lender can seize the collateral. In the context of stock trading, collateral is used to meet margin requirements for futures and options contracts.
Why did the NSE make this change? The NSE wants to make sure that the collateral used to back margin requirements is liquid and easy to sell. This will help to reduce the risk of losses for the exchange and its clearing arm.
What are the new criteria? Stocks must be traded on at least 99% of the days in the past six months and have an impact cost of up to 0.1% for an order value of ₹1 lakh to be considered collateral.
What are the implications? This change will make it more difficult for traders to use certain stocks as collateral. This could lead to higher margin requirements for some traders, or make it more difficult for them to trade altogether.
Here are some of the stocks that will no longer be eligible as collateral starting from August 1, 2024:
1.Adani Power
2.Yes Bank
3.Paytm (One 97 Communications)
4.IRB Infrastructure
5.NBCC
6.Hudco
7.Bharat Dynamics
8.Bharti Hexacom
9.Go Digit
10.Tata Investment
11.Barbeque Nation
12.Inox Wind
It is important to note that this is not an exhaustive list. The final list of acceptable equity stocks will be published in NSE’s monthly circular of acceptable securities.
