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 A change of Re. 1 in the price of a share when one speaks of a share rising or falling by so many points. In stock market indices, however, a point is one unit of the compositeweighted average on market capitalization of rupee values. A stock market index indicating weighted average of 30 scrips, also known as theBSE Sensitive Index. The daily closing figure of this index broadly reflects the performance of the capital markets. It was alleged that Global Trust Bank exceeded its Capital market exposure. Co-operative banks are under the dual control of RBI and the Registrar of Co-operative Societies. The RBI regulates banking functions while the registrar looks after the managerial and administrative functions. An investor who expects share prices to go up and hence buys them.
According to market sources, though Ketan Parekh [KP] was a successful broker, he didnot have the money to buy large stakes. According to a report
12 lakh shares of Globalin July 1999 would have cost KP around Rs 200 million. The stake in Aftek Infosyswould have cost him Rs 50 million, while the Zee and HFCL stakes would have cost Rs250 million each. Analysts claimed that KP borrowed from various companies and banksfor this purpose. His financing methods were fairly simple. He bought shares when theywere trading at low prices and saw the prices go up in the bull market while continuouslytrading. When the price was high enough, he pledged the shares with banks as collateralfor funds. He also borrowed from companies like HFCL.This could not have been possible out without the involvement of banks. A smallAhmedabad-based bank, Madhavapura Mercantile Cooperative Bank (MMCB) was KP'smain ally in the scam. KP and his associates started tapping the MMCB for funds in early2000. In December 2000, when KP faced liquidity problems in settlements he usedMMCB in two different ways. First was the pay order route, wherein KP issued chequesdrawn on BoI to MMCB, against which MMCB issued pay orders. The pay orders werediscounted at BoI. It was alleged that MMCB issued funds to KP without proper collateral security and even crossed its capital market exposure limits. As per a RBIinspection report, MMCB's loans to stock markets were around Rs 10 billion of whichover Rs 8 billion were lent to KP and his firmsThe second route was borrowing from a MMCB branch at Mandvi (Mumbai), wheredifferent companies owned by KP and his associates had accounts. KP used around 16such accounts, either directly or through other broker firms, to obtain funds. Apart fromdirect borrowings by KP-owned finance companies, a few brokers were also believed tohave taken loans on his behalf. It was alleged that Madhur Capital, a company run byVinit Parikh, the son of MMCB Chairman Ramesh Parikh, had acted on behalf of KP to borrow funds. KP reportedly used his BoI accounts to discount 248 pay orders worthabout Rs 24 billion between January and March 2001. BoI's losses eventually amountedto well above Rs 1.2 billion.