FM

KETAN PAREKH FRAUD : 

KETAN PAREKH FRAUD Presented by : Sadique zeeshan ansari Shubhan singh Nitin garg Vinita sharma Rahul pathak Nishant patel

MODUS OPERANDI : 

MODUS OPERANDI Ketan formed a network of brokers from smaller exchanges like the Allahabad Stock Exchange and the Calcutta Stock Exchange . Identified and acquired technology and communication stocks, now termed as “K-10 stocks” and ramp up their prices by simulating enhanced market activity. Ketan had large borrowings from Global Trust Bank – he got Rs 250 crore loan from Global Trust Bank, though Global Trust’s chairman Ramesh Gelli (who was later asked to quit) repeatedly said that lending to Ketan was less than Rs 100 crore in keeping with Reserve Bank of India norms

MODUS OPERANDI : 

MODUS OPERANDI Ketan and his associates got another Rs 1,000 crore from the Madhavpura Mercantile Co-operative Bank (MMCB) despite the fact that RBI regulations ruled that the maximum a broker could have got as a loan was Rs 15 crore. SEBI found prima facie evidence of price rigging in the scrips of Global Trust Bank, Zee Telefilms, HFCL, Lupin Laboratories, Aftek Infosys and Padmini Polymer. Now with the prices of select shares constantly going up,thanks largely to this rigging,innocent investors who bought such shares thinking the market as genuine,were at loss. Soon after discovery of this scam,the prices of these stocks came down to the fraction of the values at which they were bought. Some banks including Bank of India lost money heavily.

REPERCUSSIONS : 

REPERCUSSIONS Collapse of MMCB Collapse of UTI’s US-64

COLLAPSE OF MMCB : 

COLLAPSE OF MMCB About 250 pay-orders totaling Rs 2,400 crores were issues by MMCB, UTI and GTB to Parekh . The total amount involved in the pay-order fraud was estimated by the Central Bureau of Investigation (CBI) to total Rs 1030.34 crores. The CBI Report also has stated that Parekh opened 11 accounts in MMCB, Mandvi Branch, in Mumbai alone and his relatives held 16 accounts in the names of various bogus companies with the BOI, Mumbai Stock Exchange Branch.

COLLAPSE OF UTI’S US-64 : 

COLLAPSE OF UTI’S US-64 The UTI’s US-64 mutual fund, the largest mutual fund in India, comprising of twothirds of the total assets of the Indian mutual funds industry and Rs 57,500 crores in assets, collapsed in the wake of the Ketan Parekh fraud. The UTI invested Rs 3,400 crores in just 6 out of a total portfolio of 44 stocks, which was eroded by 60 per cent of its value in one year. It also invested Rs 1,300 crores in another five stocks, which was devalued by 77 per cent and stood at Rs 300 crores within a year.

MEANING AND IMPLICATION OF FRAUD : 

MEANING AND IMPLICATION OF FRAUD ‘Fraud means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter the contract’’ --- The suggestion, as to a fact, of that which is not true, by one who does not believe it to be true; The active concealment of a fact by one having knowledge or belief of the fact A promise made without any intention of performing it; Any other act fitted to deceive; and Any such act or omission as the law specially declares to be fraudulent

CAUSATIVE FACTORS OF THE KETAN MEHTA FRAUD : 

CAUSATIVE FACTORS OF THE KETAN MEHTA FRAUD 1. Large value credit frauds: absence of proper physical verification of collateral security offered; lack of proper post-disbursement monitoring to ensure appropriate end use of funds; and lack of pre-sanction survey including improper identification of borrower and verification of antecedents of prospective borrowers

ROLE OF RBI : 

ROLE OF RBI An analysis of the supervisory lapses on the part of the RBI in the Ketan Parekh fraud is detailed below. Lack of prioritization of large-value bank fraud 2. Lapses in audit and internal control 3. Failure to identify large exposure 4. Inadequate market intelligence gathering 5. Problem of dual regulation of co-operative banks

CONCLUSION : 

CONCLUSION The Ketan Parekh fraud exposes the conflicting interests between various groups, brokers, bankers, auditors and corporate entities and reiterates the need to have financial and market discipline. It renews the argument that banks should operate with prudent levels of risk, capital and reserves and should be subject to a more effective and accurate regulatory regime.