HDFC Bank in intra-day trade on January 22, 2021 dived by close to 1% to Rs. 1460.45 per share on the NSE. This is as the market watchdog Securities and Exchange Board of India (SEBI) has levied a fine of Rs. 1 crore on HDFC Bank for invoking securities pledged by BRH Wealth Kreators and violated the regulator's interim orders. On Thursday, the SEBI said the private sector lender provided loan against shares to BRH and BRH Commodities of Rs. 87.75 crore while invoking securities pledged to the extent of Rs. 158.68 crore without giving any notice to the clients.
The SEBI said that involcation of pledged securities was not in sync with the direction given in the interim order on October 7, 2019. Thus the SEBI has asked the bank to
to deposit an equivalent amount of Rs.158.68 crore along with interest from 14 October 2019 till date at the rate of 7% per annum, in a separate interest bearing escrow account, till the settlement of clients' securities is reconciled.
As per the interim order, BRH, the broking firm has been restrained from carrying out transactions in the capital market and also the bank from selling off the pledged shares. Following this order, HDFC Bank had recalled credit facilities from the borrowers as it had been called upon to honour the bank guarantees it had issued for exchange margin requirements.
The SEBI also said that HDFC Bank did not undertake any due diligence while creating pledge and the bank invoked the pledge of securities without giving the required notice to the clients of BRH and thereby depriving them a fair chance to claim back the securities. Last year , however the bank maintained that it is entitled by law to claim proceeds from securities' sale for any outstanding of the borrowers concerned, whether the securities were provided for that specific facility or not.