Lenders are recalling loans from brokerages after Karvy scam, says Deven Choksey

The Karvy issue deepened further after one of its lenders, Bajaj Finance, was understood to have moved the Securities Appellate Tribunal (SAT) against National Securities Depository Limited’s (NSDL) decision of transferring securities back to clients. Deven Choksey of KRChoksey shared his views on the matter in an interview with CNBC-TV18.

“The lenders are recalling loans and are asking the brokers to pay back the loans for the shares that they have lent. Even though the shares have been lent by the brokers, which belongs to their own books, the lenders are asking for a money back and that process has already started last week itself. It has created a sort of panic.

“Broker is required to not pledge client shares. That is fundamentally very clear and that is how it should be. You cannot be using somebody else’s property and create the finance against that particular property. That is the fundamental law. Unfortunately, the practices have been quite different than the law is. So certainly this is going to create the problem. How exactly this problem would get resolved, there are solutions available provided banking regulator as well as security regulators both of them want to listen to it."