BJP alleges scam in banks public issues

The Bharatiya Janata Party (BJP) today attacked the United Progressive Alliance (UPA) government for the "banks public issue scam" which had, according to the party, made the small investor lose about Rs 1,005 crore.

After being on the backfoot on past deals of the previous NDA regime, the BJP appeared aggressive, saying that the share prices of three banks ""Allahabad Bank, Punjab National Bank and Oriental Bank of Commerce ""were over-valued owing to "sudden" heavy trading just before the public issue, so that premium scrips could be sold at a high rate.

BJP spokesperson Prakash Javadekar said, "Despite the fact that various investors associations lodged complaints and the BJP's small investor cell protested with the Sebi on the matter, the government and regulators remained silent on the issue.

"We charge the government with either rigging the prices or helping manipulators do so."

He gave the example of the Punjab National Bank (PNB) issue which came in March 2005. "The general price level in January was just between Rs 350 and Rs 370, and trading per day was just eight lakh shares and Rs 30 crore a day.

"Suddenly, there was a high turnover which touched Rs 580 crore a day, at a rate between Rs 500 and Rs 530. The issue price was Rs 390, and it opened at Rs 349 after the issue. This resulted in a loss of over Rs 328 crone to small investors," he said.

The Allahabad Bank issue, said Javadekar, came in April 2005. "In February, the price of the share was Rs 69 and the daily trade volume was in the region of two to three crores.

"Suddenly, by March end, volumes increased up to 15-20 crore shares per day and prices jacked up to Rs 100. The issue was priced at Rs 82 and opened in the market at Rs 76 after the issue. This resulted in a loss of over Rs 500 crore to small investors," he said.

According to Javadekar, this badly affected the morale of small investors, especially in the case of the OBC public issue, where they applied for only 3.4 million shares while their quota was for 16.2 million shares.

The BJP has demanded that the government probe this "rigging" and take regulators to task for turning a blind eye to the issue. "This is a scam that has happened right under the nose of the government and it needs to be probed," the BJP spekesman said.

Needle of doubt

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• Share prices of three banks were over-valued owing to "sudden" heavy trading just before the public issue, so that premium scrips could be sold at a high rate, the BJP alleged
• According to the BJP, small investors lost Rs 1,005 crore because of the banks public issue scam
• Removal of distinction between 'rural' and 'urban' in the Act