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RBI files winding up petition against CRB

The Reserve Bank of India filed a petition on Wednesday in the New Delhi high court seeking the winding up of controversial CRB Capital Markets Ltd.

The RBI initiated the move under the RBI Act, 1934, which empowers the bank to file application under the Companies Act, to wind up the non-banking finance company which is unable to repay its debts.

The RBI moved after CRB group chairman C R Bhansali failed to respond to the RBI show cause notice within the stipulated time.

In its petition, the RBI listed complaints by several parties, including the State Bank of India and various depositors and claimed the NBFC had defaulted on payments and broken laws. RBI counsel H S Parihar said the bank had asked CRB to stop accepting deposits on April 9 after finding some anomalies in its financial dealings. He claimed even the Gujarat revenue minister had complained to the RBI regarding the company. This is the first time the RBI has sought the winding up of a NBFC.

The CRB group came under scrutiny for the first time last September when it approached the RBI for registration of the group under the NBFC. The RBI, not satisfied with some responses given, launched a detailed inspection of CRB offices through November and December. It also received complaints from many sources regarding the company's dealings.

Meanwhile, the Securities and Exchanges Board of India issued orders to the custodian of the CRB Mutual Fund not to stop transactions in CRB shares held in custody. SEBI acted after CRB officials did not turn up at the meeting called on Thursday regarding the next course of action with regards to the company.

It also took steps to halt the group's activities and asked CRB Mutual Fund not to launch more schemes. This is the second time a ban has been imposed. Earlier, SEBI had imposed a nine-month ban on the company.

Officials of the Bank of Baroda, which had reportedly invested Rs 25 million in CRB, have reportedly met Central Bureau of Investigation officers who are investigating CRB's dealings with the SBI. So far, SBI officials have not provided the CBI with all details. But now the case is registered, the CBI can demand it, sources said.

IndusInd Bank and Reliance Cap, which lent CRB Rs 200 million each will also come under CBI scrutiny, it is learnt.

Last Thursday, CRB Share Custodial Service Managing Director N M Rampooria informed the BSE that it had discontinued service as the registrar and share transfer agent of CRB Caps and CRB Corporation. The same day, under pressure from depositors demanding back their money, CRB shut down all its offices. Many officials have reportedly quit the company.

The next day, RBI asked CRB caps to present monthly cash-flow statements and statements of assets, if any. It also asked Bhansali to appear before it in three days.

But Bhansali is believed to be either in Delhi or abroad. His family has reportedly already moved to Dubai.

The CRB fiasco has already affected share prices of other NBFCs with talk going on about insuring such firms at very high rates of interest.

Finance Secretary Montek Singh Ahluwalia and Shankar Acharya, chief economic advisor to the finance ministry, also discussed the matter with RBI Governor C Rangarajan. SBI Chairman M S Verma also met the finance secretary.

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