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BUSINESS: CALCUTTA STOCK EXCHANGE
Nothing Official About It
The payment crisis is temporarily
stemmed, but clandestine financing ticks like a time bomb
By Sumit Mitra
If the suicide by
22-year-old Kolkata sub-broker Abhishek Banka and his wife Sona have left
tears in the eyes, there are other reasons for many fingers to be pointed
in disgust-at the 93-year-old Calcutta Stock Exchange's (CSE) anarchic
lurch towards collapse. Banka reportedly drowned himself in the Hooghly
on March 14, a day before CSE's weekly pay-in on Thursday, with a burden
of about 5,000 outstanding shares of Himachal Futuristic Communications
Limited (HFCL). His body was fished out from the river on Saturday and
the next day Sona killed herself by jumping from her parents' ninth floor
flat, a few blocks from where the couple lived.
While the police are still trying to piece together
information about the financial mess Banka was trapped in, CSE sources
say that the HFCL shares were booked through his broker, Suresh Fogla,
on March 1, when the scrip was riding high at Rs 718 at the National Stock
Exchange (NSE). However, it went into a tailspin the very next day, dropping
to a Rs 200-level in the two successive weeks and exposing the market
greenhorn to a liability of Rs 25 lakh as the difference in the price
of the share from its booking date till the day he died.
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"Unofficial badla rate has over-shadowed
the official one. It is a fact of life."
KAMAL PAREKH
CSE President |
More reports of stock market-related suicides
came in from Delhi last week-an earning member and his wife had killed
themselves after taking the lives of their two small children. However,
the Kolkata saga is different as, unlike the Delhi victim who had borrowed
from his employer to invest in the market, Banka, it appears, had borrowed
from a clandestine cabal of stockmarket loansharks.
Banka's broker is known to have paid up the
dues after his death. But whom did he pay? In other words, to whom did
Banka owe the money?
The answer holds the key to a much larger payment
crisis now gripping CSE, forcing it, as it did last week, to consider
mortgaging the 73-year-old exchange building on Lyons Range, right behind
the Writers' Buildings, seat of the West Bengal Government. The problem
with the exchange is that its ''BADLA'' trading system is as opaque as
its dark corridors and nobody has access to information on who is supporting
the outstanding positions and at what cost.
The usual practice of carry-forward trade is
that the speculator is free to book the shares without taking delivery
but he must pay the margin (about 20-25 per cent of the current value
of the outstanding shares) to the exchange on the weekly pay-in day, beside
making good on the difference in the price of the shares booked by him.
The finance for the carry-forward operation is provided either by the
exchange or by private financiers at a notified rate of interest, currently
11 per cent per annum. The speculator can, of course, take delivery of
the stocks as and when the price moves up enough for him to pay back the
loan with interest and still earn a profit.
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