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Thursday, December 2, 2021

BRH Wealth Kreators case: SEBI imposes fine of 1 crore on HDFC bank, to be repaid in 45 days

HDFC Bank had sold some of the mortgaged shares of BRH Wealth Creators in violation of an interim order of the regulator.

The market regulator SEBI (Securities and Exchange Board of India) on Thursday fined HDFC Bank Rs 1 crore in the BRH Wealth Creators case. HDFC Bank had sold some of the mortgaged shares of BRH Wealth Creators in violation of an interim order of the regulator. SEBI has also directed the bank in an order to deposit Rs 158.68 crore and interest at the rate of seven per cent per annum in an escrow account until a decision is reached in the case.

In fact, contrary to the instructions of an interim order of SEBI, HDFC Bank sold its mortgaged shares to BRH to recover its outstanding debt. This order was given by SEBI against BRH Wealth Creators and other units on 7 October 2019.

What was the interim order

Through an interim order, SEBI had directed BRH to discontinue any speed-up method in the securities market. Also, there was a directive that later on its assets would be used only for payment of money and / or delivery of securities. Assets in the instructions meant all of BRH’s assets, including securities. BRH had taken a loan from HDFC Bank and other financial institutions as collateral. Depositories and banks were instructed not to debit the BRH’s demat accounts and bank accounts.

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What did HDFC Bank do

SEBI found that HDFC Bank raised Rs 158.68 crore using the mortgaged securities of BRH on 14 October 2019 and then sold most of the securities to recover its dues. HDFC Bank gave loans to BRH and BRH Commodities of Rs 191.16 crore and 26.61 crore respectively. SEBI said that its interim order was not a final determination of the right to recover, but was intended to stop the sale of BRH’s assets till the completion of the investigation or forensic audit, so that the interests of investors are not compromised in any way.

Hence Sebi has imposed a fine of Rs 1 crore on HDFC Bank and asked to pay it within 45 days. Also, RBI has also been instructed to inform within a week.

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