Themes: Corporate scams / Controversies
Period : 1993 - 1997
Organization : CRB Group / SEBI
Pub Date : 2002
Countries : India
Industry : Financial Services
The CRB scam took the whole nation by storm. At one point, the Union finance ministry held a meeting everyday to get to the brasstacks of the CRB fiasco. In a meeting with SEBI, the finance minister criticized the regulator severely. The government asked the RBI to prepare a panel of auditors asking to explore the possibility of making auditing of NBFCs a prerequisite to registration.
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Non-individual unitholders who had over 10,000 units were also paid for 300 units. In the second stage, these were paid out of the sale proceeds from the listed securities. Finally, after disposing of the entire unlisted and non-traded shares, other unitholders were paid off. Thus, unitholders were able to get almost 50% of the initial sum invested.
The scam had far reaching impacts on the economy and on the banking sector in particular. Banks, already suffering from low credit offtake and borrowers' suspicion were afraid on two counts - possibility of formation of fresh non-performing assets, and the increasing stress on accountability. The scam played an important part in the declining investor confidence, poor performance of NBFCs and a host of other problems ailing the financial markets.
Vinod Baid, promoter, Prudential Capital Markets seemed to have summed up the situation aptly,
"Few people realize it but the CRB collapse has done a great deal of good to the
country. It has stopped investors from seeing ads and feeding money into the
fixed deposit whirlpool."