HDFC Bank allowed to open demat accounts

In a reprieve to the HDFC Bank, the Securities and Exchange Board of India (Sebi) today allowed the bank to open new demat accounts, saying there was no need to continue its earlier directions barring the bank from opening new accounts.

The private sector bank was barred from opening fresh demat accounts by Sebi in its interim order in the Initial Public Offering (IPO) scam during April this year.

In an order today, Sebi whole-time member Dr T C Nair said: "There is no need to continue the directions, issued to HDFC Bank, not to open fresh demat accounts."

However, he clarified that the order gave only a prima-facie finding as to the necessity of interim directions at the stage and accordingly all issues and contentions were left open to consideration by the enquiry officer and to be decided in subsequent proceedings pursuant to his report.

Sebi had barred HDFC for its alleged violation of know-your-clients (KYC) norms while allowing clients to open multiple demat accounts.

The regulator had found that 10,213 demat accounts were opened with common address through HDFC Depository Participant, raising concern over the genuineness of the account holders, which it felt, was detrimental to the safety and integrity of the depository system.

In its submission before Sebi, HDFC had pointed out that out of the total alleged 10,213 multiple accounts with common addresses, over 4,800 accounts were opened by employees or ex-employees of corporate houses, where the address of the corporate houses were provided as the correspondence address.