Five banks, Iffco and the Germany-based ACE will jointly pick up 10-14 per cent equity in the National Collateral Management Serives Company (NCMS), promoted by the National Commodity & Derivatives Exchange (NCDEX). The boards of Corporation Bank, Bank of India, Canara Bank and Punjab National Bank have cleared the equity participation and Karur Vysya Bank is likely to clear it at its upcoming board meeting on September 27. The banks would decide on the exact equity participation in NCMS after they received permission from RBI, A. Hari Prasad, chief of strategic initiatives, NCDEX informed. NCMS will be incorporated this week with an authorised capital of Rs 30 crore. All the five banks have committed to fully subscribe to it. However, the initial paid-up capital would be Rs 15 crore. NCDEX, on its part, will hold a 14 per cent stake. German partner ACE will also provide technical knowhow, besides picking up the stake. NCMS will primarily be an institution which will finance against commodities, manage risk for lenders, inspect and monitor physical commodities and provide quality certification. According to bankers, the holder of commodities assayed by NCMS will be able to borrow money at rates as much as 2-3 per cent below the prime lending rate of these banks. This will create a win-win situation for all parties involved. The exchange will have a trustworthy assayer, the participant on the futures market will get assured delivery and the owner of the physical goods holder will be able to borrow at a much lesser rate. NMCS will also extend its services to industrial commodities and metals. It will ensure that the marketable value of a particular commodity offered as a collateral is protected for both the lender as well as the exchange.
