Private sector lender ICICI Bank, which had given Rs 875 crore loan to Karvy Stock Broking on October 1, is now in a fix as Sebi has banned Karvy for unauthorised use of clients' money on Friday.
ICICI Bank is not the only lender to have exposure to Karvy. A host of other lenders like HDFC Bank which has an exposure of Rs 200 crore, Axis Bank has an exposure of 85 crore, DCB Bank has an exposure of Rs. 55 crore and IndusInd Bank has an exposure of Rs. 105 crore
It is amusing to note that when a common man goes to any bank for a loan, a host of questions and documents are needed to be provided. Here, the private sector lender has given a huge loan of Rs. 875 crore which is bound to turn NPA, with not a single EMI being paid. The whole process raises doubt about the management and the whole process of due diligence followed by the banks.
Meanwhile, Sebi has banned Karvy Stock Broking (KSBL) from taking new client and executing trades after a major scandal hit the stock markets with the brazen modus operandi of misusing clients' funds to the tune of Rs 2000 crore.
There were payment defaults occurring at Karvy Stock Broking and its clients filed complaints with the Prime Minister's Office (PMO), the Finance Ministry and Sebi. The unauthorised use of clients' funds creates a serious doubt over the conduct and integrity of KSBL, said Sebi.
According to media reports, one of the major reasons for Karvy’s downfall is its rapid diversification. In the last 10 years, Karvy forayed into a range of businesses including telecom record management services, data analytics, and manufacturing of smart IT devices and consolidated all domestic voice business under Karvy DigiKonnect Ltd. Last year, it acquired HCL Services Ltd and renamed it Karvy Innotech Ltd and also hived down e-commence support services as Karvy Next Ltd.