True Copy
CLARIFICATION GIVEN BY SHRI M.N. GOIPORIA, CHAIRMAN, STATE BANK
OF INDIA TO ECONOMIC TIMES ON 23.04.1992 AS REPORTED IN ITS EDITION
OF 24.04.1992 THAT NO DELIVERY OF SECURITIES WAS PENDING TO THE
BANK BY SHRI HARSHAD MEHTA.
SBI reconciles
Rs.600 cr securities
Our Special Correspondent
Bombay 24 April 1992
THEState Bank of India
Chairman, Mr. M.N. Goiporia told The
Economic Times here today that the
reconciliation problem which had
arisen regarding the purchase of
government securities by its
investment department had been
sorted out with the outstandings
squared up. “As of today” Mr.
Goiporia said “thereare no
outstandings”.
According to SBI Insiders, Mr.
Goiporia clarified to the bank’s
executive committee which met here
today, that Rs.600 crores worth of
securities pending rec-onciliation have
been squared up over last week.
Bankers from other banks
confirmed that there was heavy buying
of securities in the market, by a big
securities broker who had done the
deal for SBI and who is also believed
to be a big bull operator on the stock
markets in recent months.
This saw the prices of some securities,
like the 2010 price shoot up by Rs.3 to
Rs.95. This, bankers said, was
unusual for a particular day and could
only be the result of heavy buying as
there was no other cause for
security
prices to rise right now.
According to market sources the
reconciliation problem arises out of
transactions based on Bank Receipts
(BRs). The banks selling the securities
issues BRs in lieu of securities to the
purchasing bank. In this case, the SBI
appears to have been the purchasing
bank and received BRs in lieu of the
securities, acknowledging the receipt
of the money.
The BRs are subsequently
liquidated when the selling bank
delivers the securities certificates to
the purchasing bank. The money
market brokers play a key role in co-
ordinating this whole trans-action
involving cash, the collection and
delivery of BRs and the securities
between the banks.
What appears to have happened in
the SBI case - which money market
insiders say is quite common even
though the sums involved are not
always so large – is that the broker
involved collected the securities from
the purchasing bank, but apparently
did not deliver them to SBI to enable it
to liquidate the BRs held by it.
As a result, the SBI continued to
Contd. on Page 2
Page 2…

SBI reconciles
Contd. from Page 1

show outstanding BRs in its books for an

unusually long period, thanks to the collusion
of some officials in the investment
department. When this was detected about a
week ago, the SBI asked the broker to square
up the outstanding i.e. deliver the securities
in lieu of the BRs. This apparently
took about the last six to seven days,
considering the large sums involved.
This modus operandi does not involve
any default by the broker. What it means is
that the broker credited a huge credit line for
himself running into hundreds of crores of
rupees, at either nil or negligible cost, by
selling the securities to raise cash instead of
delivering them to the SBI. This money, may
have been then used to finance other
operations. In this case, it appears to have
been largely channelled to the stock markets.
This alleged linkage to the stock markets
is worrying a lot of market operators in Dalal
Street, who fear that the squaring up of the
huge transactions may lead to sizeable
offloading by the bull. It is also feared that
more banks may be involved and the banking
authorities may now instruct all banks to
quickly reconcile their books.
 SBI reconciles : --: 77
Rs 600 cti secm1itis' 1 I ,. ..
rwe Tii¥·.-now.;
••
I

Ou e,·1,.... �lflM ; � to �!
�
bMftt; �
THE��iAcbai� lh.��� �-:
man... Mr M. N. Go4>oria t.o&d The . out ·o1 � ,&N )
&oool'l'li_c TT� here t�y tiu:f. � R¢<:dpu Q31u). �
, roconcilw.loa prol>km whkh � � secu� i.wes BRJ :n I� ·o{
� re,o.nilng � pure� _of �"\lrttie: to the 'y\J��
t<)l"CT"tlmenl securities by It.a lnVffl· In th!, cue, the·, SBI IP,PMn to I :
oonk.· I; •i:
ment ��been to� haveheentbe pu�J:-nkQ,,d -�
oot-with the_qutstiodfnis � received BR.I lo 1� oft.� �rl- '.
up. -"� of t�y." �r Gotpori.t . � r.cknowJediini the rr,dept o{' !
ta i,d · "thffl-e are -•� OU µpt.andin.p". t:1e �oey ,. . : · . I '.
Acrordln, to '$Bl � Mr :.·�Bits are 1e1�tly liqlli. .! �
Gotpori:a · cl_ari&d'. t? the hw::'s �,'when· the :1e1u oe b«n;: � ;_
;F·: �
c.xocuti � • colh:m.ittoe whlch � . 1 ivens the 1eC1.Jrltiet � to
� �y. _· th&1 Ra 800 crores · the :��ng -�:ley'
worth of 98CU.rltiM � rw- market brbk� · y a key rol-e tn
ooclliAtion have � tqtitroo up co-ordiooini . thi. whole �
· . i.ct.ion· !nvo1vin,· bi.sh, j
$'
o� the l&tt �. .
�
�lt.c-<
barin ·dell�! Pi
L-�

co rr; ti on -� o( � � Wfl
&n.ken from other
firmed th.u thett wits �ry buying I 1• !ICCtl:1ties � � � . :
o( �&a in the inar:kt't. by� big: appears Lo have
ilie: .
Whti
cocurioo broker who hlKi done in the SBI �-which__ oney1 �
1 d.sa1 for SBI and who � aloo: market i�� �y: ls qui : �
co .
�Hevod to be a b� �l operator!: mon even ·th� oii gp - � �.. 1::- 1
.
_
. on the £tock tn.trl:� fn · rt.eent�' volt/Cd are� il_ways oo � 11, ! __
, �nt.M: This 1?4w � prio..� �f:: tMt the broker! itjvolved
eo� i.itiirlt>e:i., llk:e the 2010 �i the oecurlties "P.l11 ,�
th:e pu . n� Ki l
I ti

t
� up by_Rs 3 to Rs:95. This.! __ l:>ank '. oo appa:r;3it1y· � . ' __ dej
hanhn-s �. � unwiw for a1 l!\-'.er them to SB� lQ �� 1t t� .I
po.rticule.r dny ·o.nd could only be:. _l!qu{da.te the BR.s !held by .'ttl d. ' 1 c�
the result.of ho&vy buyi� t!.:I there; As 1. =-ewlt, the �Blcont1ii{ie 19 l
� no. other cau.,s-e ·ror �ntr: d.,.o� �i� l ,t
I ' S.:SI feco�cilcs
i c.o;..� ,� �- 1
i �ow'ou�ing_.BRs_in its� s
� lbr Al.l • unviruaJJy lpng pen ,
�-s·i=�� · th�. ;<>ll'IJion oi so· e
f . <¥ftcia!s in- �he:_ mvestment de
1•

xnent. When this was

I·' .:.ofOk�r.)o.. ��rf up the
· · about �..weei: ago/ the.SB I uked · e .

· -·iqgs 1.e, clef�er the 9eC\t!='ltl'eS 1

i
0� • • •

lieu 'of the BRs.• Thi� apJ)flren

rook ab.out the last six to seve
sideri�g �e· larg�
su
! ro iv��
· · ·Thi_s modus_,operandi does n ·
·
�nvolve my ·default by- the broke
Wpat it means _is. that �he broke
create<! a huge credit line fo
him,:el! running info hundreds o
· crJres qf rupees, at either .nil o
·
, '!'le .n$1�le: .�?s�. by __selli_�g the-. ·.
! cu � (tes· to · i'Stse cash !{}stead o
. ; -del vering th.em to, the ·SBI. · Th ·
; mon ey, may hav� been ·then us.eq t
� · �
_ fin n�-� 0th.er .. ope_rat.i o�. In �i
¢a.Se, 1t aJlpears ·to have bee ·
I�r��ly · ch:a.nn �l%.f• te t·ne stoc
ma.tfkets. _
. . � . . . ,
· This alleged: linbge to the stoc ·
markets is worr.ying'a lot-of ma,rke ·
opetators in Dalal Street,· who fca
that. the squaring up of th{· hug
· .transactions mar le�d- to sizeabl
'ofnoe.ding _by the bull. Jc is al··
, feared. (hat-·mo.rr. banks may
involv.ed and · the banki.n
. authorities may now i-�struct aJ �
banh to quid:ly reconcile --thei
:books. · ·.
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