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May 31, 2001
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Money > Business Headlines > Report May 31, 2001 |
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RBI seeks data on corporate fund diversion to marketsBS Banking Bureau RBI has directed banks and financial institutions to find out whether corporates have diverted funds into the stock markets. Industry sources said the central bank would submit the data to the joint parliamentary committee looking into the stock market scam. The central bank's move is significant in the context of the Sebi interim report, which has prima facie found a string of corporates diverting funds into the markets. The standing committee on finance, in its eighth report submitted in December 2000, had said large-scale diversion of funds lent by financial institutions to corporates, especially to capital markets, is the prime reason behind the rising non-performing assets of the former. It also said the FIs should change the management of the companies which have diverted funds. "We are looking into the corporates' end use of funds. New disbursement of funds will take place only if we are convinced about its use. We are looking into the current ratio and the inventories of those corporates which have taken working capital loans," said a public sector bank chairman. Banks are also scrutinising the corporate debt equity ratios. However, it is difficult to ascertain whether a company actually used the bank fund to play in the market. "There are various sources like bank or institutional funding, money raised through debt instruments like bonds and commercial paper and internal accrual. It's difficult to detect fund diversion," pointed out another banker. YOU MAY ALSO WANT TO READ:
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