HDFC Bank and Industrial Development Bank of India on Friday said they would appeal against the Securities and Exchange Board of India order barring them from opening fresh demat accounts.
Sebi, in an exparte interim order on Thursday, directed HDFC Bank, IDBI Bank, Centurion Bank of Punjab, ING Vysya Bank and 8 other non-bank depository participants not to open new dematerialised accounts till further notice.
The order followed its investigations into the manipulation of the IPO allotment process for retail investors through opening of over 59,000 DP accounts in fictitious or benami names.
The IPO Scam: Complete Coverage
Centurion Bank has figured for the first time in the list of banks used as conduit to undermine the IPO allotment process. HDFC Bank, IDBI Bank and ING Vysya Bank were fined by the Reserve Bank of India for facilitating perpetration of the IPO allotment scam.
Centurion Bank managing director, Shailendra Bhandari, said, "We will take appropriate action within the system. We still have 14 days to decide on the future course of action."
The banks named don't expect the order to affect their businesses. Centurion Bank is not much worried as it is a marginal player in DP business with just about 98,000 demat accounts. There are a total of about 11 million demat accounts opened by investors with various DPs.
HDFC Bank sources said the bank would suffer loss of incremental business till the matter gets resolved, but it is unlikely to have a major impact on revenues. The bank has about eight lakh demat accounts, bulk of which were opened during 1999-2003.
HDFC Bank would be making a representation to Sebi next week, but its senior officials did not want to comment on regulatory issues.
Though IDBI Bank has been banned from opening new DP accounts, its wholly owned subsidiary IDBI Capital Market Services will continue to serve the bank's clients wanting to open DP accounts. IDBI Capital is also a depository participant and offers a 3-in-1 account opening facility that encompasses trading account, demat account and savings or current account with IDBI Bank.
"IDBI Capital continues to open fresh DP and trading accounts as usual. Investors are welcome to contact our nearest branch to initiate operations with us," said Ketan Trivedi, head-marketing with the IDBI Bank subsidiary.
IDBI Bank said, "We will make a submission (against the ban) within the stipulated period." The Bangalore-based ING Vysya Bank spokesperson declined to comment saying the bank will be in a position to respond only after it formally received the order.
HDFC Bank had sacked 12 employees after the RBI slapped Rs 30 lakh penalty in two stages a few months ago for violating know your customer (KYC) norms and breaching prudent banking practices.
HDFC Bank had opened multiple demand accounts which were used for manipulation of the IPO allotment process in the last few years, but those were not held in benami names.
Bank officials say the sacked employees had followed the RBI prudential norms in letter but not in spirit.
