Sebi says RBI should've handled BoR case better

Stung by allegations of going easy in the Bank of Rajasthan (BoR) case, market regulator Securities and Exchange Board of India (Sebi) has shifted the blame on the Reserve Bank of India (RBI).

In a letter to the department of economic affairs (DEA), Sebi has said merger between the erstwhile BoR and ICICI Bank was approved by the banking regulator despite being "fully aware" of the "surrogate acquisitions" made by the former's promoter entities.

"When the amalgamation was approved, Reserve Bank of India was fully aware about the surrogate acquisitions by the promoter entities and despite the same, it was decided to extend the full benefit of the amalgamation to the promoters of Bank of Rajasthan without any caveats," Sebi has said in its letter to DEA, the contents of which have been seen by Business Standard.

Sebi's letter was with reference to the series of complaints received by the Central Vigilance Commission and the finance ministry against the market regulator in the matter of BoR questioning the low penalty and quality of investigation.

Sebi has said its job centred around probing whether there was any market manipulation by the promoters, while the RBI was the agency which had primary grievance against the promoters and could have handled the matter more seriously.

An email seeking comments on the matter to Sebi and RBI didn't elicit any response.

The violations in the case of BoR date back to 2009, where the promoters - the Tayal group - had actually increased their shareholding through front entities, while disclosures made by them to the exchanges showed that they had reduced their holdings. These violations had occurred ahead of the merger between BoR and ICICI Bank in 2010.

Sebi in March 2010 had passed an order against 100 promoter entities of BoR, banning these from accessing the capital market for acquiring shares under fictitious and benami names beyond the limit permitted by RBI. The order followed a February 2010 order by RBI, imposing a penalty of Rs 25 lakh on BoR.

Securities and Exchange Board of India ( SEBI )

ICICI Bank