Will NSEL crisis affect banks and finance companies?

Experts say, after the scam, there will be further depreciation in trading volumes.

Zee Media Bureau/ Amol Dethe/Tarun Sharma

Bigger the fire, more the loss. Investors and brokers are not the only affected parties of the NSEL scam. Banks and finance companies are also joining the long list of aggrieved parties.

While launching the equity exchange, MCX-SX Promoter Jignesh Shah, assured high returns to his investors. MCX-SX which is part of MCX and Financial Technologies promoted by Shah, was the first exchange to be listed on BSE.

It attracted many investors who subscribed to the issue. Along with them, 16 banks and 2 financial institutions invested too, and own a major pie of the newly listed exchange. According to MCX –SX share holding pattern, the bankers and financial institutions stake in the exchange is as large as 88.52%.

When Mr. Shah recently estimated the value of MCX-SX, it was not more than 4000 crore. On the basis of this information bankers and finance companies stake remains Rs 3000 crore. As the proportion of the NSEL scam swells, experts foresee that banks and financial institutions suffering major losses, on this account.

"The valuation of holding companies will get affected. This will make investors think twice before putting their money in such exchanges," said Rajnikanth Patel, ex-MD & CEO, BSE.

Experts, believe that IFCL, Union Bank and Punjab National Bank might be the major losers. IFCL has 13.20%, Union Bank has 11.47% and Punjab National Bank has 9.18% stake in the MCX-SX. Followed by IL&FS's 4.99%, Corporation bank, IOB, Indian bank, OBC, Allahabad bank, Aandhra Bank, BOI and Bank of Baroda's 4.59%. Also, Syndicate bank's 2.29%, HDFC banks 2.20,% and SBI, UBI, VIjaya bank, Axis banks 1.84 % stake. Apart from Banks, MCX stock exchange ESOP Trust also owns 1.12% in the exchange.

"Commodities were the major attraction for investors behind investing in MCX -SX. Banks and Finance Companies also invested in the exchange for the same reason," said P.H.Ravikumar, EX, MD & CEO, NCDEX.

Even before the scam, MCX-SX was not a well performing exchange. Even after many incentives, its trading volumes did not go up. In the quarter ending March 2013, MCX-SX reported the loss of 10 Cr, which increased to 33 crore in June 2013 quarter. Experts say, after the scam, there will be further depreciation in trading volumes.

IFCL: 13.20%
Union Bank: 11.47%
Punjab National Bank: 9.18%
IL&FS: 4.99%
Corporation bank: 4.99%
IOB: 4.99%
Indian bank: 4.99%
OBC: 4.99%
Allahabad bank: 4.99%
Aandhra Bank: 4.99%
BOI: 4.99%
Bank of Baroda: 4.59%.
Syndicate bank: 2.29%
HDFC bank: 2.20 %.
SBI: 1.84 %
UBI: 1.84 %
VIjaya bank: 1.84 %
Axis banks: 1.84 %
MCX stock exchange ESOP Trust: 1.12 %.

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