Confirming the stand put up by Reliance Share and Stock Brokers Ltd (RSSBL), a wholly owned subsidiary of Reliance Capital, before the Joint Parliamentary Committee (JPC) probing the stock market crash of 2001, the National Stock Exchange (NSE) has confirmed that the brokerage was a lender in the markets in the crisis period.
This puts to rest allegations that the crash was the result of a few lenders -- principally RSSBL -- pulling money out of the markets. The NSE, in a letter dated June 21, 2002, has informed the Securities and Exchange Board of India (Sebi) that RSSB was a lender to the extent of almost Rs 1,000 crore on February 28, 2001.
The JPC had shot off numerous queries on the badla financing transactions of the Reliance group, and whether their withdrawal from the market was the reason for the crash.
Based on preliminary replies, the JPC had asked the NSE and Sebi to vouch for the claims made by RSSBL that it was actually in the market as a lender, but its trades went unexecuted because there was no demand for funds.
The NSE letter, signed by senior vice-president M L Soneji, and written to Sebi executive director C S Kahlon, says: "The total value of buy orders in the ALBM session of Reliance Shares and Stock Brokers Ltd, which remain unexecuted at the end of the session on February 28, 2001, was approximately Rs 781 crore and total value of orders cancelled by the trading member in the ALBM session on that day was approximately Rs 212 crore."
The Reliance group had maintained that its investments and subsequent withdrawal from the badla system were part of its normal investment decisions.
A Reliance spokesperson, when contacted, declined to comment on this issue. The annexure to the NSE letter to the regulators spells out the details of the scrips in which the firm had offered to finance stocks through the ALBM mechanism.
The list reveals a list of 115 different stocks in which RSSBL was a lender of money, but there were no takers (borrowers) for the funds in that particular session.
The total amount of funds which were being offered was to the tune of Rs 781 crore. The annexure also lists 29 different scrips where the broking firm cancelled orders, the value which was to the tune of Rs 212 crore RSSB was the largest player in the ALBM segment of the NSE between October 2000 and March 2001 with a maximum investment of Rs 1,600 crore in December-end.
