KETAN PAREKH SCAM

IMPACT OF THE SCAM ON FINANCIAL

INSTITUTIONS
 Ketan Parekh was threatening to sue the Bank of India for defamation,
because it complained about the bouncing of Rs 1.3-billion pay orders
issued to the broker by the Madhavpura Mercantile Cooperative Bank. He
seemed to suggest there is nothing more that the authorities would be able
to pin against him.

 At last investigations by the Central Bureau of Investigation and the

Securities and Exchange Board of India reveal that the sheer magnitude of
money moved around by Parekh or available to him for his market
manipulation was a staggering Rs 64 billion.
STEPS TAKEN BY SEBI AFTER SCAM

 ALBM: Automated Lending and Borrowing Mechanism;

 BLESS: Borrowing and Lending of Securities Scheme
 SEBI launched immediate investigation on the scam
 It suspended all the broker member directors of the BSE
governing board
 Banned trading by all stock exchange presidents, vice
presidents and Treasures
 SEBI banned naked short sales
 RBI started inspecting accounts and sub-accounts twice a
year in spite of once in two years
 SEBI allowed bank for collateralised lending only through
BSE and NSE
WEAK SET-UP
 The financial crisis in Asia in 1997 has led to a
fundamental re- think about the way in which financial
markets should be governed. While other Asian countries
are converging towards an international set of governance
best practices, India is still lagging behind in terms of
quality and speed of implementation.
 In a globalize economy, countries which fail to base the
financial liberalization on strengthened economic policies
and institutional structures are bound to suffer financial
crisis.