Karvy crisis | EY to conduct forensic audit; exposure fears prompt lenders to approach NSE, SEBI: Report
Bankers want to understand the extent of the problem and whether it will lead to a default by Karvy’s companies
November 27, 2019 / 11:04 AM IST
The National Stock Exchange (NSE) has appointed EY to conduct a forensic audit of Karvy Stock Broking, media reports suggest.
In related news, banks and financial service companies, including ICICI Bank and HDFC Bank, have expressed concern over their exposure to group companies, reports Business Standard. The lenders have discussed the matter with NSE and the Securities and Exchange Board of India (SEBI).
Bankers want to understand the extent of the problem and whether it will lead to a default by Karvy’s companies, the report said. “The bankers are worried about real estate transactions mentioned in the SEBI order and wanted to know their nature,” a source told the paper. The size of illegal transactions is currently pegged at Rs 2,000 crore.
Moneycontrol could not independently verify the report.
The market regulator has banned Karvy from taking on new clients over alleged illegal use of clients’ securities.
Also read: What should existing clients of Karvy Stock Broking do?
On November 25, Karvy Stock Broking chairman C Parthasarathy spoke about the alleged diversion of funds to Karvy Realty in an interview with CNBC-TV18. “Karvy Realty is a subsidiary of Karvy Stock Broking. It has been in existence for the last 10-15 years. Some of the investments that we have made in other subsidiary companies have been done through Karvy Realty with the objective of protecting the net worth of Karvy Stock Broking. This has been done for a very long time,” he said.
The alleged unauthorised transactions undertaken by Karvy have raised questions over practices followed by brokerages.