Markets watchdog Sebi has refused to provide any relief to Bajaj Finance and three other lenders in the Karvy Stock Broking matter regarding pledged shares.
On December 4, the Securities Appellate Tribunal denied any immediate relief to top lenders who had petitioned against the transfer of securities held with Karvy Stock Broking Ltd (KSBL) back to the clients. The tribunal had directed the four lenders to approach Sebi by December 6 and that Sebi pass an order.
“Reliefs sought by the represented are not tenable and the remedy for the petitioners lies against KSBL before the civil court of competent jurisdiction,” Sebi whole-time member Ananta Barua said in the order. The petitioners are Bajaj Finance, ICICI Bank, HDFC Bank and IndusInd Bank.
The case pertains to the securities held by KSBL, which were allegedly used by the brokerage for borrowing with the help of the power of attorneys that they had. The securities held by over 83,000 clients were given back to them.
The regulator noted that under no circumstances clients’ securities received in payout can be retained by a stock broker beyond five trading days or can be used for any other purpose.
“In the absence of corresponding trade instruction, pledging of securities of such clients is also unauthorised and, hence, not treated as a valid pledge in law,” the 29-page order issued late on Friday said.
Sebi also quoted a part of the tribunal’s order, dated December 4, which had said it was on record that NSE and NSDL transferred the securities to the clients' accounts after due diligence.
In this context, a prayer to recall the same or to retain the same as frozen accounts of those clients becomes untenable, the regulator said, quoting the tribunal’s order.
On November 22, Sebi barred KSBL from taking new clients as a stock broker and also prevented it from using the power of attorney given by clients after the broker was found to have allegedly misused clients’ securities.
PNB divergence
Punjab National Bank (PNB) has under-reported its non-performing assets by Rs 2,617 crore for 2018-19, according to the RBI’s risk-assessment report. In a regulatory filing on Saturday, PNB said the divergence in provisioning for bad loans in was to the tune of Rs 2,091 crore. PTI Consequently, based on the divergence assessed by RBI in provisioning for bad loans, PNB said it would have reported a net loss of Rs 11,335.90 crore for FY19 as opposed to a net loss of Rs 9,975.49 crore. The bank said it reported gross NPAs of Rs 78,472.70 crore, while as per RBI's assessment the figure was Rs 81,089.70 crore.
