Regulation overhaul may be triggered for loan against shares

There have been multiple instances of rigging of the stock market prices by the promoters of the listed companies. Though, globally there are strict guidelines over insider trading, there are more ways to find loopholes in those regulations. There are multiple objectives of the price rigging by the promoters. One such hidden objective of the promoters used to be to inflate the share price and pledge them with banks. Selling those in stock market leads triggers insider trading disclosures but pledging triggers even more disclosures. Inspite of this, the promoters preffered the route of loans against shares. Though the promoters get only 50-60% loan against shares, the incidence reported yesterday is likely to see overhaul in SEBI regulations.

Indian benchmark indices have managed to maintain high levels but shares of most small- and mid-cap companies have witnessed more than 50 per cent erosion in value from their peak levels seen some time in mid-2018. 

This has led many NBFCs to follow up with company promoters asking them to bring in additional margin, a call which has not been heeded by many.

Onkar Bhanarkar
Onkar is a Masters in Cyber Security, Ireland. He is a cybersecurity professional with extensive knowledge in Digital forensic investigations and Risk assessment. Onkar Bhanarkar is the Specialist Regtech analyst who contributes articles on money laundering enforcement actions in India, GDPR, Risk assessment, and Cyber Attacks.