MUMBAI, FEBRUARY 18: The Reserve Bank of India's (RBI) Governor Bimal Jalan on Friday said banks were not speculating in the current stock market boom. Jalan was responding to reporters questions in the wake of an RBI statement on Thursday saying it would review the role of banks in financing initial public offerings."No. there was no speculation in the stock markets (by banks). Banks said as far as their role was concerned they were quite comfortable with the internal procedures they had and some of the banks said they would review what was going on," Jalan told reporters on the sidelines of a financial markets seminar.Indian stock markets soared to record highs last week and concerns about overheating led the market regulator Securities and Exchange Board of India (SEBI) to slap additional margins on leading stocks to curb liquidity. "I am not concerned about movements in the capital market. It is the SEBI's function," he told reporters on Friday.The RBI statement issued on Thursday said bankers had informed the central bank that while some banks were liberal in issuing guarantees towards meeting margin requirements of stock exchnages, the country's banking system as a whole was not over extended.With banks and share brokers misusing the system of lending against shares, the Reserve Bank of India (RBI) is planning to review lending against shares and consider regulatory measures for the purpose. This possibility was indicated by the RBI when the concerns expressed in various quarters regarding banks' role in financing stock brokers and individuals against shares were discussed at a meeting with bankers here on Thursday.``The meeting was called amidst reports that bank funds are being diverted to the stock market and indiscriminate IPO financing,'' said a banker. With the Sensex crossing the 6,000-mark and the market showing huge volatility, a section of bankers suspected that part of the bank credit drawn by the corporates is flowing into the stock market. "There is no way we can prove that the corporates are diverting funds to the stock market as no borrower is asking for a raise in the limit. But if one sees the sudden growth in cash credit and withdrawals from the current accounts, one suspects that the money is not necessarily used for productive purposes," said a banker.A section of the bankers feel that they have been witnessing some of the symptoms of 1992 when the stock scam broke out. "There are some familiar symptoms. sudden draw down in cash credit, demand for overdrafts. We will not be surprised if the money is flowing into the market," said another banker.CORPORATES ACTIVE ON BOURSES: National Stock Exchange managing director Dr R H Patil had said in Bangalore on Thursday that the present volatility in the Indian stock market was due to the involvement of rich corporate houses in stock trading according to market feedback.Patil who delivered the keynote address at a Confederation of Indian Industry (CII) meet told newsmen here that several affluent corporate houses who were flush with money have diverted it to the stock market. Further, more brokers were also involved in speculative trading resulting in the phenomenal rise of the stock market index in the recent time.
