Last week, during a stormy meeting with panicky brokers in Mumbai, Securities and Exchange Board of India (sebi) chairman D.R. Mehta admitted that the country's bourses were virtually on life support. sebi now estimates the current scam triggered by the collapse of Big Bull Ketan Parekh (KP) to be well over Rs 3,000 crore—Rs 1,000 crore more than the previous estimate.
The situation has been further worsened by alarming revelations that major Indian financial institutions and companies continued to fund the tainted broker and his associates as late as mid-March, when the crisis had become public. Market sources admit that a whopping Rs 1,600 crore was siphoned off from the country's banking and financial sectors in March 2001 and diverted to KP and friends to either invest in the markets or pay up their dues. Much of this money lent to corporates is completely unsecured, with no collateral backing it. It is unlikely that the lending banks and financial institutions will ever manage to recover their loans. This is a massive loss of public funds.
As Parekh, under...
