The Hindu Business Line : Brokerages, public sector banks tie-up on the rise

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Brokerages, public sector banks tie-up on the rise

PSBs gain value addition and income from retail stock investors

Tania Kishore Jaleel

Mumbai, Nov 23 Public sector banks are planning to cash in on the increasing retail participation in the equity market.

But unlike their private counterparts such as ICICI Bank and HDFC Bank with in-house trading platform, they use trading platforms of stock broking houses. Corporation Bank, which already has a tie-up with IL&FS, has also signed up with Religare and Reliance Money.

It has plans to seek similar tie-ups and is close to doing so with Sharekhan shortly. Union Bank has an arrangement with Asit C Mehta Investment Intermediaries while Bank of India has tied up with Anand Rathi & Co. Motilal Oswal Securities is in talks with both SBI and PNB. “Religare in fact has started a new channel, Bancinvest, where we will be tying up with multiple public and private sector banks. We have already tied up banks like Indusind, Tamilnad Mercantile and Corporation Banks”, said a spokesperson for Religare.

“Most of the PSU banks don’t have the infrastructure, the software required or the necessary manpower. So it’s easier to tie up with a brokerage and get the necessary specialisation and this also stays in line with the regulatory requirements,” said Mr U. Balakrishna Bhat, General Manager, Corporation Bank.

Advantages

Tying up with brokerages, banks can also add value to their portfolio, say analysts. They have ready access to the broking services and can avoid the intricacies to float a separate subsidiary. Another advantage going in for a tie-up with private broking houses is that it takes lesser time for the banks to put in place an equity trading facility for their customers. “The main advantage for banks is that the integration takes place in a month’s time. The time requirement is minimal,” said Mr Amit Golia, Senior Vice-President and Head of Retail, Motilal Oswal.

He also added that investors nowadays just don’t want to do trading but also want advice and other such services provided by professional broking houses. So these tie-ups add value to the profile of the banks.

Win-win tie-ups

Mr Krishnan Sitaraman, Head, Fund Services & Fixed Income Research, CRISIL, explains that this alliance is a win-win relationship for both players, wherein, the banks get a twin advantage. “They can generate fee-based income from this activity and this adds to the diversity of their revenue stream. In addition, it helps them to retain their customers who need not look at other avenues to meet their equity broking requirements,” he said.

“Banks tying up with broking houses will definitely expedite the process of increasing the retail participation. Especially good and reputed banks play a strong role in this process,” said Mr Sudip Bandyopadhyay, Director and CEO, Reliance Money.

But some of them are betting on women taking to stock trading in a big way. “In an environment where retail participation in equities is increasing with even housewives taking to it, this seems to be good opportunity for both banks and brokerage houses,” said Mr Sitaraman.