Indusind Questions Sebi Take On Rubber Cheques

IndusInd Bank has disputed the contention of both the Securities and Exchange Board of India(Sebi) and the Calcutta Stock Exchange(CSE) that it had not informed the exchange about the bouncing of cheques of brokers on time.

The stand by the bank is significant as one of the arguments put forth by Sebi has been that the stock market crisis of March this year could have been mitigated if a payment crisis at CSE involving 22 of its most important brokers had not taken place.

The Bank in its deposition to the Joint Parliamentary Committee has countered the Sebi stand that the payment crisis in CSE was partly because of the delay by IndusInd Bank in informing the exchange about the defaults on margin money due from brokers. Margin money from brokers was supposed to be used by CSE as a cover for defaults by brokers in their trade settlement.

 

The bank has informed the committee "in respect of margin money, CSE neither advises the bank nor does the Bank have any knowledge of margin money due from brokers". Instead the bank has said that whatever the status of the transactions "in respect of accounts where sufficient balance is not available, a shortfall advice is sent to CSE on same evening with details of brokers" without fail. In its report on the crisis in the bourse CSE has given the example of one brokers' account to claim "IndusInd bank (which is the banker for the exchange) had dishonoured the margin cheques of Dinesh Dalmia to the extent of Rs 16 crore, which was supposed to have been presented on March 5, 2001".

In its favour the bank has also produced copies of the notices which include the name of the brokers with their account numbers and the quantum of insufficient balance that are sent to CSE everyday. This includes the notice sent for the controversial payment cycle no 148, 149 and 150 for early March where the exchange faced repeated bouts of payment crisis.

IndusInd has said "the details of all cheques not honoured by 5 pm are advised to CSE immediately by telephone and the dishonoured cheques returned".

The bank has also said that at no stage did it finance any of the shortfall in the brokers' account, as has been alleged in the first interim report by Sebi. The market regulator had said "the bank had also reportedly gone back on its earlier commitment of bank advance to the extent of Rs 15 crore to Harish Biyani ( a broker) against physical shares of Zee Telefilms after dematerialisation".