Ketan Parekh Scam

Contents:Introduction Mechanism of scam Impact of scam SEBI Measures Conclusion

Introduction

Mechanism of SCAM

Ketan Parekh, a qualified CA, and a stock broker, identified a number of stocks (popularly called the K10), and took up huge positions in these. 10), these. He used a large number of Benami accounts and smaller stock exchanges, such as the Kolkata and Ahmedabad stocks He borrowed heavily from banks such as Global trust Bank and Madhavpura Mercantile Cooperative Bank. Bank. When the price was high enough, he pledged the shares with banks as collateral for funds. funds.

Cont..It was alleged that MMCB issued funds to KP without proper collateral security and even crossed its capital market exposure limits As per a RBI inspection report, MMCBs loans to stock markets were around Rs. 10 billion of which over Rs. 8 Rs. Rs. billion were lend to KP and his firms KP reportedly used his BOI accounts to discount 248 pay orders worth about Rs. 24 billion between January and Rs. March 2001 BOIs losses eventually amounted to well above Rs. 1.2 Rs. billion

The MMCB pay order issue hit several public sector banks very hard

K 10 StocksAftek Infosys DSQ Software Global Telesystems Himachal Futuristic Communications Pentamedia Graphics Satyam Computers Silverline Technologies SSI Zee Telefilms Pritish Nandy Communications

Impact of scam

The effect of the Ketan Parekh scam on the stock markets:The Bombay Stock Exchange (BSE) President Anand Rathi's (Rathi) resignation added to the downfall. Rathi had to resign. By the end of March 2001, at least eight people were reported to have committed suicide. Hundreds of investors were driven to the brink of bankruptcy. A change of Re. 1 in the price of a share when one speaks of a share rising or falling by so many points

The effect of the Ketan..It was alleged that Global Trust Bank exceeded its Capital market exposure. During this period it was the reverse. People got panicked. Many took back there investments. It affected the FDIs and the FIIs.

The Sensex lost over 700 points

The immediate fallout of market crash in Bombay

The payment crisis broke out in the Calcutta Stock Exchange (CSE)

SEBI MeasuresSEBI first realized after 1992 scam. Has been given considerably more powers since then. Set up the Department of Supervision. Advisory Board on Banking, Commercial and Financial Frauds (ABBCFF) came into picture.

A high level committee comprising of RBI Governor, SEBI Chairman, Finance Secretary was created. A Serious Frauds Office was set up under the Department of Company Affairs (DCA). SEBI banned 26 entities from trading into market.

Conclusion

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