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Calcutta's unofficial badla market worries players

Rifat Jawaid in Calcutta

The unofficial badla market in Calcutta is causing a lot of concern for market participants. They say billions of rupees -- 'unauthorised money' -- involved in the dark practice have begun to worry the markets in the recent days.

While Calcutta Stock Exchange has an official badla market, it also has a rampant unofficial badla market. Since the unofficial transactions do not pass through the exchange, the sanctity of the trade is suspect though defaults are rare.

What appears to be adding legitimacy to such apprehensions is the mysterious reluctance of the CSE mandarins and brokers to speak on the subject.

None, including CSE president Kamal Parekh, was ready to answer queries related to badla trading.

However, a leading stock expert in Calcutta told rediff.com that unofficial badla transactions have been in existence at the CSE for years with quite 'a good amount of money involved through unofficial sources'. He, however, said that the recent crisis in Indian bourses wasn't a fallout of illegal badla.

According to him, the entire market is grappling with a host of problems: delivery-oriented problems, poor surveillance system and the Security and Exchange Board of India's (Sebi) decision to ban on short sales.

He said, "Though badla has been in vogue at the Calcutta bourse, the situation elsewhere in India too is no better. The root of the problem lies in a weak system, which prompts the market to move in a negative direction.

"Sebi should be proactive in revoking the decision immediately once the decision to ban short sales produced results. Moreover, there should be periodic review of the goings-on, which can enable the CSE authorities to have a fair idea about the market. The other worrying factor is the absence of online system to keep track of illegal transactions."

As for the poor surveillance network, many stockbrokers have gone on record in charging Parekh with apathy.

Vivek Mahajan, a well-known stockbroker, told rediff.com that even when the payment crisis was in its infancy, the CSE miserably failed to identify the malaise.

"Had they taken necessary steps towards correcting the gray areas in the beginning, things would not have come to such a pass," Mahajan remarked.

According to other share market experts, despite the knowledge of illegal badla, the CSE bigwigs simply are in no mood to curb such practices merely because of the involvement of too many powerful brokers.

"Calcutta has been an important badla trading centre. There are at least 3-4 other stock brokers who have been pumping in 'illegal' money into the share market for years," said a stock market broker.

"Bombay-based stock broker Ketan Parekh has been known to visits Calcutta frequently," he said.

Reliable CSE sources revealed that about Rs 5-10 billion is involved in the unofficial badla: a staggering figure, considering that the CSE's average daily transaction is worth Rs 15 billion.

Experts have already begun apprehending that Indian bourses could well dip again on Thursday since all badla payments are made on this day at CSE.

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