Karvy chairman C Parthasarathy arrested for bank loan default case

The accused company became a defaulter by diverting the funds into its own and connected businesses entities and on November 22, 2019, the SEBI revoked the pledge of securities with Banks/NBFCs and returned the securities/accounts. The complaint banks were left with no collateral and thereby KSBL defaulted in repayments of about Rs 137 crore as of March 31, 2021, a press release from the police said.

Further investigation revealed that the accused also diverted the Rs 720 crore of clients funds which are lying in the bank accounts linked to their trading account and Karvy is also learnt to have taken credit facilities from several other banks/NBFCs to the tune of about Rs 680 crore by pledging client securities without their consent and defaulted further repayment, the release said.

Two cases based on complaints from the HDFC bank have also been registered against KSBL and Karvy commodities pertaining to loan frauds amounting to Rs 340 crore and Rs seven crore, it added. In November 2019, SEBI barred KSBL from taking new brokerage clients after it was found that the brokerage firm had allegedly misused clients' securities to the tune of over Rs 2,000 crore.

In November 2020, the Bombay Stock Exchange declared Karvy Stock Broking as a defaulter and removed the brokerage house from its membership after similar action was initiated by the National Stock Exchange.