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CSE turns to general reserves to meet shortfall

Kausik Datta & Aniek Paul

After exhausting the entire cash component of Rs 380 million in the Rs 800-odd million settlement guarantee fund (SGF), the Calcutta Stock Exchange (CSE) has now turned to its general reserves to meet its payment shortfall in settlement no. 2001150 which ended Friday.

The fund-starved bourse on Friday raised nearly Rs 250 million from the general reserves by part encashment of fixed deposits (FDs) and drawing funds from banks against the balance.

Confirming this, a CSE director, on condition of anonymity, said, "The bourse has raised the money from general reserves by partly encashing FDs and pledging the balance amount with banks to tide over the payment shortfall in the settlement."

General reserves of CSE stood at Rs 220 million on March 31, 2000, with another Rs 360 million being held as reserves for a training centre and library, and Rs 47.4 million being held for the proposed new exchange building. The CSE board had earlier passed a resolution to take recourse to the general reserves if needed, the director said.

With these steps, CSE claimed to have disbursed the entire Rs 2.29 billion payout on Friday reversing its earlier decision of impounding 'dubious' trades of Rs 530 million. While the authorities raised about Rs 250 million from the general reserves, leading stockbrokers contributed the balance.

A section of brokers complained CSE had drawn on the margin account to meet payment obligations. Many of these brokers who had a receivable position in settlements 149 and 150, did not receive their margin balances. Bourse authorities admitted that some payments had been adjusted against the margin balance of the concerned brokers.

CSE has completely wiped out the SGF cash component in two tranches. It had withdrawn Rs 220 million on March 17 and drew Rs 160 million on Thursday.

Only one component of the SGF, representing members' deposit in shares, remains untouched after these withdrawals.

Lyons Range sources said erosion of the cash component of SGF would affect the bourse's modified carry forward system (badla trade) bringing it to a halt.

Accepting this, exchange officials said the Securities and Exchange Board of India (Sebi) had given special permission to carry out badla trading without any cash component in SGF for the time being.

CSE employees Friday tried to stop borrowings against the general reserves on the ground that "this is a fund of accumulated profits in which we have contributed too". However, CSE authorities said the assets as well as liabilities with the exchange were meant for members and therefore they should be bailed out by all means. Employees' salaries are met from interest accrued on general reserves.

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