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RBI picks holes in GTB deals with OCBs

Rakesh P Sharma

The Reserve Bank of India in its reply to the Joint Parliamentary Committee said that during the course of its inspection of Global Trust Bank's Nairman Point and Fort branches in Bombay in July this year it has found several instances where the overseas corporate bodies had booked purchase orders without having sufficient balance in the non-resident external account.

Further, the OCBs had made payments by debiting their NRE accounts but the shares had not been received by the OCBs.

According to RBI, Far East Investments Corporations had received the payment for 295,000 shares of Himachal Futuristic Communication shares sold but the OCB has delivered only 235,000 shares of the company. Moreover, the OCB had received the shares but they have not made payments for the purchase of these shares.

Kensington Investments, another OCB, purchased 1.6 million shares of HFCL in June 2000 for which brokers contract notes were produced but no payment for these shares was made.

According to RBI, these shares were immediately transferred to Wakefield who sold these shares in five days in June/July 2000 and remitted the proceeds amounting to Rs 2.53 billion on dates of sale itself. Further, Wakefield Holdings paid for these shares about four months later.

In its report, RBI says, "The irregularities appears in buying shares of Kensington on credit basis. Further, the sale of Wakefield Holdings appears to be outside stock exchanges as the amount of sale proceeds cannot be credited on the same, if the shares are sold on stock exchanges."

The RBI during its inspection found that the copy of the agreement between Brentifield Holdings, Mauritius and Mastek Holdings Corporation, US for the transfer of 1 million shares of Manscon Global from Mastek Holdings Corporation to Brentifield Holdings for payment/settlement overseas was not available with the bank.

Also, the supporting document from other OCBs to Brentifield Holdings in respect of 1 million shares of Global Tele-System were not available with the bank.

RBI in its report said, "These irregularities are being reported to enforcement directorate for investigations. Further, it was also found that the bank had no system to monitor the prescribed ceiling of five per cent holdings by individual OCBs in any company for these transactions relating to the period under inspection."

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