Karvy case | Lenders may approach SAT to access shares pledged by co

Private sector lenders have hired a law firm and may approach the Securities Appellate Tribunal (SAT) to gain access to client shares that Karvy Stock Broking (KSBL) had pledged with them, reports Mint.

The lenders, five private banks and an NBFC, have a collective exposure of Rs 1,415 crore against these pledged shares. They are likely to challenge the Securities and Exchange Board of India (SEBI) order, which termed these pledges as ‘unauthorised’, the paper added.

Moneycontrol could not independently verify the report.

A source told the publication that lenders would contend the pledges as "bona fide lending activity, as they were against legitimate shares from Karvy’s account."

Also read: Karvy case | SEBI examines role of exchanges, 12 brokerages: Report

"Lenders are looking to separately approach the regulator with representations of their exposure and details about the securities held. If SEBI does not give us a hearing, then we will look at appealing to SAT," they added.

As per an NSE report, Karvy pledged securities over Rs 2,300 crore belonging to 95,000 clients to raise Rs 600 crore.

ICICI Bank with Rs 875 crore has the biggest exposure, followed by HDFC Bank (Rs 195 crore), IndusInd Bank (Rs 105 crore) and Aditya Birla Finance (Rs 100 crore).

"The banks are currently trying to ascertain how much of their exposure is at risk. If some of the loans are associated with misused client securities, this would turn into an NPA. The appeal, when it happens, would be to access the pledges as it is not the lenders’ fault," a second source said.