CRB scam probe to focus on watchdogs
Following the arrest in Hong Kong of scandal-ridden CRB Capital Markets chief Chain Roop Bhansali, India's Central Bureau of Investigation (CBI) will now focus on the dubious role played by several regulatory agencies.
Bhansali - founder and promoter of CRB Capital Markets and kingpin in the estimated 10 billion rupee (about HK$2.15 billion) financial scam - and five of his family members, including his wife who is a director in the company, were arrested by a CBI squad and brought to Bombay on Monday.
Officials of India's central bank, the Reserve Bank of India; the watchdog institution of the stock markets, the Securities and Exchange Board of India (SEBI); and the country's largest bank, State Bank of India, can expect the CBI to ask them potentially damaging questions.
The CBI is trying to unravel how Bhansali was able to dupe investors in the massive fixed deposits scandal.
An official rating agency, Credit Analysis and Research (Care), has already been asked to show why action should not be taken against it for giving the CRB Capital Markets' non-convertible debentures (a fixed deposit which can be traded on the stock market) offer a high 'FA' rating.
Such a rating indicates high security with regard to payment of interest and repayment of principal. The rating was given despite the company's history of bouncing cheques and large-scale liquidity problems.
CARE has been promoted by one of India's three largest developmental banks, the Industrial Development Bank of India (IDBI), which gave financial assistance to CRB.
CBI's emphasis now will not only be on tracing the vanished 10 billion rupees that was systematically siphoned off after the debenture offer, but also on pinpointing those officials who directly or indirectly assisted the scam.
It is understood the CBI has already studied a reserve bank report filed last year, which revealed large-scale irregularities in the use of public funds by CRB Capital.