IPO scam: Fresh allotments likely

A system to check multiple applications during initial public offers has been put in place, says Chidambaram.

Having imposed monetary penalty on ten commercial banks for irregularities leading to the IPO scam, the government today said all illegal beneficiaries of the scam would be dislodged and fresh allotment of shares made in favour of deserving applicants.

Announcing this in Lok Sabha, Finance Minister P Chidambaram said: "Irregularities have taken place and we have detected who the illegal beneficiaries are. We have caught them and punished them. A system has been put in place to detect such irregularities in the future, so that no one can make multiple applications during any IPO. Now, quoting of Permanent Account Number (PAN) has been made mandatory for making any application."

He, however, said no bank had lost any money in the IPO scam. The Reserve Bank of India had imposed monetary penalty on ten commercial banks, namely Bharat Overseas Bank, Indian Overseas Bank, Vijaya Bank, ICICI Bank, HDFC Bank, Standard Chartered Bank, Citibank, IDBI Ltd, ING Vysya Bank, and Centurion Bank of Punjab.

Elaborating on the steps taken by the government in this regard, he said all Depository Account (DP) holders would have to submit their PAN by December 31 this year, failing which their DP accounts would be frozen. Although a system had been put in place, "we shall continue to be vigilant to avoid the recurrence of any such irregularity," he added.

On a supplementary question on involvement of foreign banks like Citibank and Standard Chartered Bank in the scam, Chidambaram said though the banks themselves were not involved, managers of some of their branches had failed to vet multiple applications made by individuals.

Observing that these banks had been penalised, he said branch licencex applied for by them were kept on hold throughout this year. Now that the banks had been punished and been asked to remain vigilant, it was time to allow the banking system to grow.

The RBI, he said, had also issued a number of directives and suggestions to commercial banks for improving operational standards and risk management practices. "It, however, has not imposed any restriction on these banks," he added.

Market regulator SEBI had passed an ex-parte interim order in April 2006 directing a few banks functioning as DPs not to undertake any fresh business in that capacity till the enquiry was completed and the final order passed.

"Subsequently, this direction has been discontinued in case of some banks, including HDFC Bank, IDBI Bank and ING Vysya Bank," he added.