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June 13, 2001
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Money > Business Headlines > Report June 13, 2001 |
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Mechanism to monitor bank fund flow to SEs on cardsSubhomoy Bhattacharjee The government is studying the possibility of setting up a centralised monitoring mechanism to control the flow of funds from the banking system to the stock markets. The finance ministry has begun discussions with the RBI and the Securities and Exchange Board of India to work out the modalities of the mechanism. But, it is likely to be a difficult issue as Sebi and the RBI have divergent views on who should be responsible for guiding the exposure of the banks in the stock market. The issue of a controlling mechanism has acquired an urgency in the wake of the recent stock scam where some of the brokers played in the markets with funds raised from the co-operative and private sector banks. The government is worried that the JPC on the stock scam will insist on such a measure since the previous scam was also largely funded by the flow from the banking sector. According to sources, though there is a RBI guideline, issued last November on the upper limit of individual banks' exposure in the bourses, it has obviously not been enforced. While the public sector banks have been cautious about their exposure limits, some of the private sector banks have not stayed within the limits. Given the size of the financial sector, it is difficult for the apex bank to pursue this role as it requires a diligent ex post facto investigation on an almost daily basis. In its interim report on the scam, Sebi has stressed upon the necessity of such a mechanism. "In the context of the large funds procured from the banks by some broker entities, involved in market manipulation, it be very important that this area of capital market exposure be examined," it said. The report also said, "an appropriate centralised monitoring mechanism for such funds coming from the banking system to the markets be evolved." Powered by YOU MAY ALSO WANT TO READ:
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