Sebi Rejects Sbi, Pnb Arms Proposal Exemption From Segregation Of

The Securities and Exchange Board of India has shot down the proposal forwarded by Punjab National Bank Capital Markets and SBI Caps for exemption from the new Sebi rule of segregation of leasing, fund-based and capital market activities. However, senior officials indicated that the capital market watchdog may work out modalities for implementation of the new rule soon.

The top brass from the two merchant bankers met the Sebi chairman on Monday requesting the capital market regulator to exempt subsidiaries of nationalised banks and financial institutions from new norms. Sebi took a decision at the board meeting in Chennai on September 3 to ensure segregation of activities of NBFCs which also carry out capital market related services.

 

Sebi sources said the chairman is said to have clearly told them that banks and financial institutions which have merchant banking activities as their divisions will be exempted. However, subsidiaries are separate entities and they cannot be exempted. "We have told them that they will be given two years time to complete formalities of this segregation. They told us about the operational hiccups and the growing anxiety in the banking sector about the issue," a Sebi official said. Sebi officials said that these companies will be given about two years time for carrying out the segregation. "They also raised issues pertaining to the past business and transactions already executed. Some have already claimed depreciation benefits on leased assets.

SBI Caps also has put on hold plans to capitalise its stockbroking subsidiary. "We told them that we will consider giving more time to complete the entire segregation. We will also work out modalities with which this segregation can be completed. However, complete exemption cannot be granted," the official added. The issue is also likely to be taken up in the Sebi board meeting on October 15. However, sources added that there is no possibility of granting any exemption to these companies.

SBI Caps and PNB Caps are arms of the State Bank of India and Punjab National Bank respectively. Besides these two, merchant banking outfits of Bank of India, Bank of Baroda and Allahabad Bank would also have to carryout the segregation.

Sebi said the arms are separate entities and they cannot be exempted. They will get two years to complete formalities of this segregation, said a Sebi official.