Late Share Delivery Irks Banks

The problem of a huge backlog of securities at the BoI Shareholding is set to snowball. Leading foreign custodians, including Hongkong Bank, Cititbank, and Deutsche Bank have written to the Securities and Exchange Board of India (Sebi) complaining about the delay in receipt of securities from the BSE clearing house.

Although Sebi is yet to take a decision on this issue, a detailed probe into the functioning of BoI Shareholding is not ruled out.

A top Sebi official, on conditions of anonymity, confirmed having received complaints from these custodians. The country's largest provider of custodial services, the Stock Holding Corporation of India (SHCIL) too has written a letter to the market regulator about undue delays in receiving shares for which payment has already been settled.

According to the Sebi source, the amount of securities due to the foreign custodians is much less than what is due in case of SHCIL. "Different custodians have mentioned different figures in their letters. In case of Citibank it is in the range of Rs 2 million," informed the Sebi source.

However, market sources have informed that the securities due to these custodians will be in the range of crores of rupees.

Meanwhile, some of the foreign custodians met senior NSE officials to discuss this issue. These custodians have expressed satisfaction at clearing facilities provided by the NSE. "They have informed that there is no outstandings from the National Securities Clearing Corporation," said a top NSE source.

BSE president J C Parekh has described the issue has `reconciliation problem' which he said will soon be sorted out. Parekh said that the BSE's clearing house was burdened with excess securities which resulted in the current backlog. He reiterated that the situation was well within control.

At a press conference organised on Friday, BSE president R C Mathur had stated that the exchange confirmed to the by-law 316 while declaring payout on June 22. As per bye-law 316, an asset as cash, bank balance, bank guarantee, refundable contributions and marketable shares and securities. Hence BSE argued that as long as these assets are higher than broker's liabilities then the broker cannot be declared a defaulter.

In the same press conference, BSE officials had said that the total outstanding position of BoI Shareholding, which had shot up to Rs 113 crore at settlement ended June 12 was brought to Rs 9 crore.

Market players have however expressed serious concerns at the manner in which the issue was handled. It may be noted that the following the huge backlog the SHCIL managing director B V Goud wrote a stern letter asking the BSE asking proper action.