As a policy trading should be permitted against cleared funds (ch received deposited and cleared in the bank)Principally this will be for buying.Obviously in this case trading limit will be restricted to funds available. Clients can be given interest on call deposit rate. This will eliminate the entire process of credit to client Cleared funds can be allocated for trading. For online trading such deposit and allocation can be done online instead of cheque deposit.
Cheques in transit or deposited but not cleared should not be permitted for trading.
In case of sale of security by the client, he may allowed to buy against net funds that will be availabe on T 2 days.
Above process will eliminate credit to client and risk will be eliminated. There will be no collusion and there will be no need for penalties
