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Sarbajeet K. Sen

"There was an added urgency to ensure that corrective steps were taken in time since any wrongdoing in PSU banks is always a more sensitive matter."

New Delhi , Jan. 16

THE high-level committee on capital markets (HLCC) has asked the Securities and Exchange Board of India (SEBI) to put depositories and depository participants (DPs) on a special alert to guard against malpractices by applicants during the ongoing follow-on public offers from two public sector banks - Bank of Baroda and Andhra Bank.

According to senior Finance Ministry officials, there has been heightened concern among the HLCC on the two PSU bank issues since any malpractice could become a major embarrassment for the Government.

Both BoB and Andhra Bank follow-on offers have opened for subscription on Monday (January 16) and close on January 20.

"The HLCC meeting, which took place in Mumbai last Friday, took note of the fact that some PSU bank offers were opening in a couple of days. There was an added urgency to ensure that corrective steps were taken in time since any wrongdoing in PSU banks is always a more sensitive matter," senior Finance Ministry officials said. Besides senior officials of the Finance Ministry, the SEBI Chairman, the RBI Governor, and the IRDA Chairman attended the meeting.

The follow-on offers by the two Government-owned banks are the first major ones by such entities since SEBI recently unearthed scams in the application and allotment processes in the recently concluded initial public offers of Yes Bank and IDFC. The HLCC had met to discuss corrective measures to guard against recurrence of such scam.

SEBI had unearthed that a handful of devious investors in the Yes Bank and IDFC offers had made windfall gains by cornering allotment of shares in the two public offerings by making several thousands applications through numerous demat accounts. They are held by investors in DPs affiliated to the two depositories - NSDL and CDSL.

Officials said that the Government and the regulatory bodies were confident of putting corrective measures in place in quick time. "What is required are small alterations in the software of DPs and their participants to detect the multiple applications. Our understanding is that the software change at the DP level is very, very minor while at the depository level is just a bit more complex," officials said.

The Finance Minister, Mr P. Chidambaram, has already assured that all corrective measures are being put in place and that guilty in the Yes Bank and IDFC issues would be punished. Other than BoB and Andhra Bank, a host of other companies are set to hit the market soon.

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