Besides, Kotak will also not accept mobilisation of funds under mutual funds and UTI schemes as well as RBI bonds. Although Kotak has decided not to close down these offices, there will be very little business left at these centres, claim market sources. Another group company, Kotak Mahindra Capital, has also stopped accepting retail fixed deposits (FDs), it is learnt. Only FDs of over Rs 5 lakh are being accepted.

In a letter addressed to its sub-brokers, Kotak Securities has said that although it will not be accepting any fresh fixed deposits, it will continue to work in all primary equity and debt issues. But in the current scenario when public issues are rare, the going will be tough for Kotak Securities in relatively smaller centres like Rajkot, Surat, Pune, Indore andLucknow.

Kotak Securities' move to stop business could be as good as closing shop in many of these centres, according to market sources.

The move to stop accepting FDs and other instruments is also likely to result in downsizing of staff substantially. Efforts to get in touch with the company officials proved futile.

Till 1995-96, non-banking finance companies (NBFCs) were thriving in the bouyant fixed deposit market. Lured by high interest rates, depositors flocked to put their money in FDs. But with the crash in interest rates and mounting defaults in the retail segment, business dried up and many NBFCs have been forced to close shop. According to market sources, even some of the bigger NBFCs are finding it difficult to find fresh business.

Kotak Securities' decision to stop retail operations in these fixed-income areas is a part of the company's major restructuring exercise after a year of turbulence in financial markets.

Kotak Securities is also in the process of rationalising its business focusin view of the market outlook, its relative strengths and economic compulsions of the fixed deposit mobilisations. The company, as part of its restructuring drive, has already started reducing the number of companies for which it used to mobilise funds.

According to the letter sent to the sub-brokers, the FD market has not shown any appreciable change in the past few months and the company has encountered a substantial decline in overall mobilisations. The largescale defaults by NBFCs and constant downgrades in credit ratings assigned to their FDs have further eroded investor confidence in FDs.

Kotak Securities, an affiliate of Kotak Mahindra Finance, is a joint venture with Goldman Sachs. The global investment banker took the 25 per cent stake in Kotak Securities in February 1996 and the balance is held by Uday S Kotak.

In 1995, the proprietory broking card in the name of Uday S Kotak was corporatised to Kotak Securities. Kotak Securities, ranked by Prime as number one for maximum mobilisation ofprimary debt and equity paper, slipped to the third position in 1997-98.