Karvy case | Banks assess exposure to other brokerages: Report

In the wake of the Karvy Stock Broking case, banks are reviewing their exposure to brokerage firms, Mint reported.

Lenders have written to brokerages, asking them to verify whether securities belong to them or the clients. Lenders are concerned that the secured loans could become unsecured, if backed by clients securities.

Moneycontrol could not independently verify the report.

Karvy has allegedly transferred clients’ securities worth Rs 2,800 crore illegally, forcing market regulator Securities and Exchange Board of India (SEBI) to ban them from taking new clients.

“We are taking a relook at the documentation and other risk management measures required to ensure that the loan against pledged shares is not misused, like in the case of Karvy," a chief risk management officer of a private sector bank told Mint.

Some banks are mulling reducing their exposure to smaller brokers by 10 percent, the proprietor of a mid-sized brokerage told the paper.

The National Securities Depository (NSDL), on December 2, transferred securities worth around Rs 2,000 crore to over 83,000 clients of Karvy.

Four lenders – ICICI Bank, IndusInd Bank, HDFC Bank and Bajaj Finance Bank – have approached the Securities Appellate Tribunal (SAT) over the transfer by the NSDL.

The SAT asked SEBI to hear the banks’ plea on December 6 and pass an order by December 12.