Bse Admits Its Systems Are Inadequate

The BSE top brass, which has been battling to resolve the share delivery crisis, admits that the existing clearing infr-astructure at its depository, BoI Shareholding, was not devised to meet emergencies and an 'upgradation' of the system is an imperative.

The backlog of shares which have to be delivered by the Bombay Stock Exchange (BSE) clearing house to various custodians including Citibank, Hong Kong bank and Deutsche Bank has been estimated at Rs 5.5 crore. BSE president Jasvantlal C Parekh said that the backlog of deliveries was expected to be cleared by settlement no 16 (in a fortnight's time). The trading system is currently moving through settlement number 14. According to the exchange top brass, the backlog of shares for delivery have been estimated thus: SHCIL - Rs 3 crore; Citibank - Rs 50-70 lakh; Hongkong bank - Rs 60-70 lakh; and, Deutsche Bank Rs 50 lakh.

Market circles, however, place the collective figure in excess of Rs 13-15 crore, though this amount remains unconfirmed.

The Stock Holding Corpo-ration of India Ltd (SHCIL) had shot off a letter to the Securities and Exchange Board of India (Sebi) complaining of a huge backlog of shares which they had paid for and have not been delivered. SHCIL was followed by foreign custodians like Hongkong Bank, Citibank and Deutsche Bank, who have also written similar letters of delay in delivery of shares from the BoI Shareholding.

"We have carried out a detailed study of what went wrong at the depository clearing system. It is clear that the system was not devised to handle a huge work load, considering that the work load had increased from Rs 100-200 crore in the first quarter of the year to Rs 1,100 crore in April," Parekh said. According to Parekh, a complete upgradation of the system would need to be carried out in terms of software, clearing process and the manpower.

"We will, however, consider these issues only after the backlog is cleared,'' he said. The exchange is currently undertaking the fire-fighting exercise together with the BoI Shareholding, in assistance with a corporate body IIT Invest Trust, sources said. Sebi had sought details from the domestic and foreign custodians on the problems faced by them in relation to the BSE clearing house and an official probe has not been ruled out.

While the BSE top brass has declined to comment on why the process at the depository could not have been streamlined over the years, there is a section of the market which feels that the recent crisis could stress the relationship between the two and possibly result in the undermining of the role of BoI Shareholding.