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Thursday, May 16, 2002

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Unofficial badla is back -- Current rates range between 18 and 22 pc

Ambarish Mukherjee


UNOFFICIAL badla has made a comeback on the bourses and, along with it, negotiated deals and adjustment entries associated with them, according to stock brokers and exchange officials.

The ruling rate is in the range of 18 - 22 per cent, depending on the transaction, knowledgeable sources told Business Line and added that since, in general, interest rates are ruling quite low, the badla rates too, have come down compared to the earlier peak rates ranging between 24 and 36 per cent.

Highly informed sources in the capital market said that right now Ahmedabad, Kolkata and Kanpur had emerged as the hub of badla transactions across the country.

The Securities and Exchange Board of India was aware of the developments, but was yet to initiate any firm step to stop it, the sources said.

Simultaneously, again Calcutta Stock Exchange (CSE), Ahmedabad Stock Exchange (ASE) and Kanpur Stock Exchange (KSE) are witnessing adjustment entries for negotiated deals being keyed in during the early trading hours.

"Since trading volumes are very low on KSE and ASE adjustment entries for negotiated deals are very easy here. Even CSE now has a relatively small volume of less than Rs 50 crore these days and earlier also, these three exchanges were known for their notorious badla operations. I will not be surprised if it is found that none of the transactions on these exchanges reaches the delivery stage,'' a very large operator having simultaneous operations in Mumbai, Kolkata and two other cities said.

Real trading is taking place only on the NSE and the BSE. All other exchanges have formed subsidiaries to take up membership of BSE and their member-brokers are routing the trades to BSE, which provides better liquidity and spread. Over-exposure on BSE and NSE is being taken care of by balancing buy and sell orders through adjustment entries on any of these three bourses.

Following the March 2001 securities scam spearheaded by stockbroker Ketan Parekh, the Automated Lending and Borrowing Mechanism (ALBM) available on BSE, often referred to as the official badla, has been stopped by the Securities and Exchange Board of India (SEBI).

Unofficial badla had been one of the crucial factors leading to the March 2001 securities scam, just like all other stock securities scam in the country since the eighties.

During March 2001 alone, according to published reports, badla financiers had lost around Rs 800 crore in the unofficial badla market leading to several suicides across various cities.

Now a new set of badla financiers have emerged and in the current low interest regime, badla, albeit unofficial, provides a reasonably high return compared to other available options, market sources said.

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