"It is a good business opportunity for the non-depository (non-DP) banks to have tie-ups with IndusInd Bank... this will improve their operational efficiencies. The nationalised banks can offer loans against shares, the shares can be with us and we can mark a lien on behalf of them," said IndusInd Bank's senior vice president, N Suresh Pai.

He further added that the state-run banks could maintain lesser margin amount and increase their value of security as shares in demat form can be liquidated faster.

"Besides, the portfolio volume of banks gets increased. In demat form, banks can on-lend funds to more customers. It reduces the risk - the defects, which are present in physical form", Mr Pai said.

Non-DP banks can now offer the facility of overdraft against IndusInd Banks' shares by combining the depository services facility from them.

But will this association mutually benefit both the nationalised banks as well as IndusInd?

Said Mr Pai: "For IndusInd Bank, the depository clientele goes up. Our bank will benefit through the fees connected with de-materialisation."

"For example, holding and transaction charges, which is presently 0.02 per cent. And lastly, there will be more cohesiveness in the functionality by developing better working relationships with nationalised banks."

Nationalised banks retail investors will also form a potential customer base for IndusInd Bank. These state-run banks have a large portfolio of securities in physical form which have yet to go in demat form.

Other important aspects are that there are areas that nationalised banks cover wherein private sector banks are virtually not available.

IndusInd Bank can cover that large database in terms of area - the western side of Gujarat is not covered by any private sector bank. So wecan make our presence known there", Mr Pai said.

But will there be a threat of poaching the customer-base of nationalised banks?

"We are not participating as a bank, but as depository partners. State-run banks or any non-DP bank need not worry about IndusInd bank snatching their customer-base as we are interested only in the DP services. However, the only issue is that banks should be in a position to assure us the recovery of charges and we will then assure them of a commitment of not poaching into their client base", Mr Pai said.

In case of nationalised banks, the advantage will be that lending margins can go upto 25-30 per cent and the cost of maintenance of shares would be virtually zero, and there would be easy saleability in demat form. Lastly, the operational efficiencies and branch-wise co-ordination of nationalised banks is enhanced.