Hyderabad: In connection to the IndusInd Bank loan default, the city police on Thursday arrested Rajiv Ranjan Singh, chief executive officer and G. Krishna Hari chief financial officer of scam-hit Karvy Stock Broking Limited (KSBL) for alleged financial irregularities, defaulting of payments and raising loans against securities of clients without their consent.
The arrest was based on a complaint by IndusInd bank, which has alleged that KSBL defaulted in repayments of about Rs 137 crore, as per the police press release.
What are the events leading up to arrest?
Earlier, C. Parthasarathy, Chairman of Karvy was arrested on charges of defaulting a loan to the tune of Rs 137 crore to IndusInd Bank, as per news agency PTI. The investigation which followed after the arrest of Parthasarathy revealed that CEO Rajiv Ranjan Singh, who is in-charge of trading and broking, had unauthorizedly executed trading in 9 other companies’ trading accounts from 2014 to 2019, Avinash Mohanty, joint commissioner, (detective department) Central Crime Station told the Indian Express.
The brokerage firm’s CFO, G Krishna Hari, diverted funds which were raised from banks by pledging client securities as collateral to nine shell companies as per the instructions of Parthasarathy, states the report.
This was carried out in order to reflect huge turnover and market share of KSBL in the stock market and caused huge loss of Rs 300 crore which was shown as book debts.
In November 2019, Sebi had barred KSBL from acquiring new brokerage clients after it came to notice that the brokerage had allegedly misused clients' securities to the tune of over Rs 2,000 crore. In November 2020, Bombay Stock Exchange declared Karvy Stock Broking as a defaulter and removed the brokerage house from its membership after a similar action was initiated by the National Stock Exchange, as per PTI.