MUMBAI, June 10: The Securities and Exchange Board of India (SEBI) is likely to take action against more merchant bankers for various lapses in their operations. The market watch-dog is currently studying the inspection reports of 24 merchant bankers, including some of the top merchant bankers in the country.``We're now waiting for the Reserve Bank of India (RBI) to initiate action against some finance companies (who also act as merchant bankers). We're going through the inspection reports of 24 merchant bankers. All of them have not committed irregularities. This inspection was conducted before the CRB scam broke out. It has nothing to do with CRB,'' said SEBI chairman D R Mehta.This is on top of show-cause notices issued to 130 merchant bankers for their failure to meet underwriting commitments last year. ``We've started receiving replies from these merchant bankers. We will go through the replies to see whether any action is necessary,'' Mehta said.The RBI, it is learnt, is closely monitoring the functioning, especially the asset-liability position, of a dozen top finance companies. Incidentally, some of these finance companies are also category-I merchant bankers whose inspection reports are being scrutinised by the SEBI.The stand taken by the SEBI is that while merchant banking business of finance companies are regulated by SEBI, fund-based activities like leasing, hire purchase and deposit mobilisation come under RBI's purview. After banning CRB Capital Markets and other finance companies (like Global Finance Corporation) connected with the group from taking up fresh merchant banking assignments, SEBI on Monday had taken a similar action against Prudential Capital Markets.RBI is likely to take action against two finance companies in the Helios group and JVG Finance in a couple of days. The Patna office of the RBI is believed to have recommended action against these firms for violation of various norms. Pending RBI action on JVG Finance, SEBI has decided that share allotment of its recent public issue would be kept in abeyance.In fact, Prudential Capital and Global Finance were active as category-I merchant bankers last year. In the list the top private merchant bankers who handled maximum number of issues prepared by Prime Database, Prudential Capital topped with 53 issues. Global Finance was in the fifth position by handling 19 issues.The SEBI action comes at a time when the primary market situation was bad for merchant bankers. ``Of the total 1162 merchant bankers under different categories, as many as 720 did not handle any assignment during the year in any capacity. Out of 435 registered Category-I merchant bankers, only 234 were active in 1996-97,'' says a study by Prithvi Haldea of Prime Database.Simultaneously, SEBI is actively considering a proposal to segregate merchant banking business from other fund-based activities. If implemented, this is likely to lead to another shake-out among merchant bankers.
