SEBI alleges MCX-SX concealed facts while diluting equity

Additional solicitor general Darius Khambata, who appeared on behalf of SEBI brought on record that MCX-SX promoter Jignesh Shah and his wife were controlling a company called ‘Lafin’, which in turn holds 26% stake in Financial Technologies, also promoted by Mr Shah

Mumbai: The Securities and Exchange Board of India (SEBI) on Wednesday alleged in the Bombay High Court that MCX Stock Exchange (MCX-SX) had concealed some facts while diluting its equity stake under the ‘capital reduction-cum-arrangement’, reports PTI.

SEBI counsel, additional solicitor general Darius Khambata, argued that MCX-SX had also not informed it about modalities and nitty-gritties of this scheme.

Justices DY Chandrachud and Anoop Mohata were hearing a petition by MCX-SX against the market regulator for not allowing it to start equity trading despite complying with all regulations.

The court observed that it was obligatory on the part of MCX-SX to disclose the buy-back to SEBI and that such negligence could not be tolerated.

The SEBI counsel brought on record that MCX-SX promoter Jignesh Shah and his wife were controlling a company called ‘Lafin’, which in turn holds 26% stake in Financial Technologies (FTIL), also promoted by Mr Shah.

MCX-SX submitted that during discussions, SEBI executive director JN Gupta had himself mooted the idea of warrant model for diluting equity stake of the stock exchange to 5%. It was only then MCX issued warrants to 18 public sector banks with an assurance that this would not be converted into equity.

As per the SEBI guidelines, no promoter of a stock exchange can hold more than 5% equity stake.

The HC had yesterday asked SEBI whether it would accept an undertaking from the promoters of MCX-SX that they would maintain their equity holding at 5% and not exercise the option of converting warrants into equity. The regulator responded by saying it would seek instructions from the SEBI board in this regard.

FTIL and MCX concluded their arguments yesterday, while SEBI will give its submissions on Thursday.

In a petition filed on 19th July last year, MCX-SX had urged the high court to direct the SEBI to grant clearance for commencing operations in the equity segment as it had complied with the guidelines issued by the regulator.

Three days prior to filing the petition, MCX-SX came out with a public notice expressing anguish at the delay in getting licence and also at the ‘misinformation’ campaign launched by rivals.

MCX-SX pleaded that although it had complied with all SEBI norms, it was not given the permission to commence equity trading. It also alleged that the capital market watchdog was favouring a rival stock exchange.

User

Credit up 18.7%, deposits rise 16.9 pc in 12 months: RBI

As per RBI data, credit offtake during the last one year stood at Rs41.29 lakh crore against Rs34.78 lakh crore in the same period of the previous year while deposits went up to over Rs56.34 lakh crore till the end of July this year against Rs48.19 lakh crore as on 30 July 2010

Mumbai: Credit offtake from banks grew by 18.7% to over Rs41 lakh crore during the one-year period ended 29 July 2011, indicating a slowdown in investments and industrial activity, reports PTI.

The growth of credit has been above the 19% mark during past few months.

According to data from the Reserve Bank of India (RBI), credit offtake during the period stood at Rs41.29 lakh crore against Rs34.78 lakh crore in the same period of the previous year.

Meanwhile, deposits went up to over Rs56.34 lakh crore till the end of July this year against Rs48.19 lakh crore as on 30 July 2010. This is a rise of 16.9% on an annual basis.

In its first quarterly monetary review last month, the RBI had said that credit growth is likely to slow down as a result of the recent rate hikes.

RBI said that credit growth would be around 17%-18% this fiscal, as against the earlier projection of 19%, while deposit growth has been pegged at 17%.

During 2010-11, bank credit had increased by 21.5% cent, while deposits grew by only 15.5%.

India Inc has also complained that frequent rate hikes have resulted in slowing down of investments and industrial growth.

RBI has hiked its key-policy rates three times this fiscal, and 11 times since March 2010 to curb inflation.

User

RBI issues draft guidelines on IRB approach

Under the proposed Internal Rating Based Approach scheme, banks are allowed to use their own internal estimates for some or all of the credit risk components in determining the capital requirement for a given credit exposure. The RBI has sought comments on the guideline by 9th September

Mumbai: The Reserve Bank of India (RBI) on Wednesday said it plans to allow banks to calculate at their own the capital requirement to handle credit risk if they meet certain criteria, like risk oversight norms and corporate governance, reports PTI.

The central bank has issued a draft guideline for allowing banks to shift to Internal Rating Based (IRB) Approach.

Under this scheme banks are allowed to use their own internal estimates for some or all of the credit risk components in determining the capital requirement for a given credit exposure.

“This (draft) guideline is meant for the banks which are willing and allowed by the RBI to adopt more sophisticated IRB approach,” the central bank said.

The credit risk components include, Probability of Default (PD), Loss Given Default (LGD), Exposure at Default (EAD) and Effective Maturity (M).

The Basel-II framework provides two broad methodologies to banks to calculate capital requirements for credit risk, namely—Standardised Approach (SA) and Internal Rating Based (IRB) Approach.

The SA measures credit risk based on external credit assessments.

The RBI has sought comments on the guideline by 9th September.

User

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)