bond market was down for the third consecutive trading
day yesterday with the budget proposal to levy a 0.15
per cent transaction tax on purchases of securities routed
through stock exchanges playing havoc with the market.
said the biggest loser if the transaction tax came into
force would be the government as it would find it difficult
to push through its annual borrowing programme.
the banks will run a huge systemic risk as the statutory
liquidity ratio (SLR) holdings will lose relevance in
an illiquid market where investors are staying on the
SLR holdings are meant to be liquidated to generate cash
in hours of crisis. In an illiquid market, banks cannot
do that," said the chairman of a large bank.
Reserve Bank of India is in talks with the finance ministry
on the matter. If the government sticks to the proposal,
17 primary dealers will be forced to close shop. These
primary dealers collectively made a pre-tax profit of
Rs 1,470 crore in 2003-2004.
they been subjected to the transaction tax last year,
they would have to cough up Rs 450 crore, based on the
volume of trade in the gilts market.