RBI, Sebi discuss HDFC Bank breach

The Securities and Exchange of India (Sebi) and the Reserve Bank of India (RBI) met on Monday to discuss the breach of foreign portfolio investor cap in HDFC Bank, said sources with knowledge of the development. 

The regulators discussed whether new systems can be put in place for monitoring of shareholdings to avoid breach of foreign portfolio investor (FPI) limits in future. The meeting was trigged by the breach of 74 per cent FPI cap in HDFC Bank during Friday’s trade. 

Custodians, who are responsible for FPI trading and settlement, were also part of the meeting. “The meeting was to discuss better monitoring. RBI enquired whether the orders executed after it issued a circular reimposing the ban were inadvertent or on account of lapses at the end of custodians or exchanges,” said a source.

The regulatory officials also discussed whether trades after a cut-off time could be annulled, and should brokers be held liable for the breach, added the source. 

The RBI had issued a circular banning fresh FPI purchases around 1.40 pm on Friday. Market players said some trades already in the system could have been executed.

On Friday, shares worth Rs 15,000 crore were traded in HDFC Bank, of which 66 per cent or close to Rs 10,000 crore were delivery-based trades, mostly from FPIs. Shares of HDFC Bank had soared as much as 9.5 per cent on the back of the huge demand from FPIs. 

The scrip eventually settled 3.5 per cent higher. Shares of HDFC Bank rose 2.5 per cent to close at Rs 1,411 on Monday, with shares worth Rs 400 crore changing hands.