Centre smells scam, asks agencies to probe market

Sounding the alarm bell to prevent another scam, the Central Government has asked regulators and investigating agencies, including the Reserve Bank of India, the Securities and Exchange Board of India, the Intelligence Bureau (IB), the Enforcement Directorate (ED) and the Directorate of Revenue Intelligence (DRI), to probe possible manipulation in the market, which is witnessing a bull run with the Sensex nearing the 8400 mark. A meeting of all the agencies was convened secretly two days ago to look into possible insider trading by brokers, individuals, corporates and FIIs, an informed source told PTI here on Friday. Finance Minister P. Chidambaram also called a meeting of an internal committee of advisors on the capital market on Thursday to discuss threadbare the market trend. "We want to ensure that the markets function orderly. We want to be sure that there is no manipulation,'' the source said. The Government has asked the RBI to look into the equity exposure of non-bank finance companies and cooperative banks, after receiving reports that some of them are resorting to loans against shares beyond the permitted limits. Clean chit to PSBs SEBI has been asked to track companies, whose share prices have increased manifold in the recent weeks. The IB, the ED and the Central Board of Direct Taxes (CBDT) have also been asked to study the trend. The stock exchanges have also been alerted and asked to give data on abnormal movement in prices of some shares. Though the Ministry gave a clean chit to PSU banks whose equity exposure in the capital market was well within the 5% limit, the source said the RBI was asked to see whether non-deposit taking NBFCs' loans against shares were within the prescribed limits. The RBI has also been asked to probe cooperative banks, which might be mis-utilising their powers and lending public money to their directors or brokers for investing in stocks. ``During the scam involving Madhavpura Mercantile Cooperative Bank in 2001, both SEBI and the RBI were not sure about their role in probing the involvement of big brokers,'' the source said. This time, SEBI and the RBI have been alerted before hand so that they can probe a possible nexus between cooperatives and brokers. At the same time, the ED had been asked to look into the money laundering aspect, especially whether some of the local brokers and corporates were re-routing black money through FIIs or other channels. Going by the volume of transactions taking place in the bourses especially in penny stocks and mid-cap shares, the Government also sees a major revenue implication. For this reason, the DRI and the CBDT have been put on high alert. Last time, the Joint Parliamentary Committee had pulled up the regulators and the Finance Ministry for lack of vigilance and timely action in preventing the share scam and the UTI fiasco. PTI