RBI finds OCB transactions real

Mumbai: The Reserve Bank of India (RBI), in its study of transactions executed by overseas corporate bodies (OCBs), has concluded that all of them had actually taken place and were not bogus. Earlier, there was a notion among a section of key people that most of these transactions were of fraudulent nature, comprising only of bookish entries.

The study, undertaken last month, was conducted on a sample of 100 out of 604 transactions reported to the Securities and Exchange Board of India. The 100 transactions covered were executed between 1 April 1999 and 31 March 2001.

The overseas corporate bodies covered by the study included, among others, Almel Investments (Mauritius), Kensignton Investments, Brentfield Holdings and Wakefield holdings. Some of the stocks in which these OCBs had transacted were Lupin Laboratories, Sri Adhikari Brothers Television Network Ltd, Global Telesystems Ltd, SSI Ltd., Adani Exports Ltd, Nirma Ltd, Himachal Futuristic Communications Ltd, Zee Telefilms Ltd, Gujarat Ambuja Cements Ltd and East India Hotels Ltd.

The findings of the study are:
1) Wherever required and in all such transactions where ADRs/GDRs were converted into shares, the same were delivered to the concerned overseas corporate body. The concerned custodians have certified this that shares so converted had been delivered to the respective OCBs.
2) The custodians have also certified that in all such transactions, which took place between the OCBs, credit into the account of one OCB followed the debiting of the account of the other OCB.

In the aftermath of the Ketan Parekh stock market scam, there were demands from various quarters that OCBs should be banned as they were being misused for carrying out bogus transactions with the sole aim of manipulating stock prices. In fact, a committee comprising RBI and Sebi officials had also suggested banning OCB investments through the portfolio investment scheme.

Later a high-level committee on capital markets was formed, which is in the process of framing norms for using OCBs for making investments into the stock markets. The norms are likely to be tightened anyway.