Brokers not spared from the credit crunch

The credit crunch, economic slowdown and melting of stock markets has resulted in all-round pressure on broking companies. The lack of liquidity in markets has pushed up the cost of financing and one of the worst hit by this are stock brokers.

The situation has turned upside down for the broking houses. When the markets were bullish, lenders were lined up. However now, most of the credit lines have dried. Banks are not willing at all to lend to brokers while the NBFCs too are charging exorbitant rates.

As a result, some of the broking houses are not in the position to provide leverage to even their regular customers. On the other hand, the global meltdown of stock markets has also swept away a number of customers, leading to a sharp weakening of demand side for broking houses. If the markets do not improve soon, things are bound to get further tighten for some of the well known names in the broking segment.