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Dishonoured cheques trigger run on CRB Capital deposits

Beverly Mathews

CRB Capital Markets, a high-profile non-banking finance company promoted by C R Bhansali, is reeling under a run on its deposits. In a scene reminiscent of the controversial Sanchaita investment fiasco in West Bengal in the late 1970s, a large number of depositors queued up last Thursday outside the CRB head office at DBS House, Bombay, and sought to withdraw their deposits.

Last month, the Reserve Bank of India barred CRB from raising fresh deposits for non-maintenance of reserve requirements and also withdrew its in-principle clearance given to the company earlier for setting up a bank. Panic gripped the depositors as several cheques issued to them by CRB had bounced, following which they had asked for cash payment. CRB did make cash payments on the interest components, but only to a few depositors. Unable to meet the rising demands, CRB closed its offices on last Thursday, leaving the depositors high and dry.

The RBI has asked CRB to explain how it plans to repay the deposits, which should be around Rs 1.39 billion as on March 1996.

But irate depositors said the RBI action was already late. The central bank should immediately initiate liquidation proceedings and pay off the debtors, they said.

According to reports, CRB is shifting assets out of its offices and unless the premises are sealed most of the movable assets will be shifted out. All sign boards of RBI have been removed from its Bombay head office.

Depositors said CRB group vice-president A K Katiar told them that he was not responsible for CRB Capital Markets. "I cannot offer you any guarantee that you will get back the principal component of your deposit," Katiar is said to have told them.

A depositors said, "Whatever payments have been made so far must have been made out of the petty cash amounts. Now the money must have been over and so CRB has closed its office." The company's interest burden was around Rs 80-100 million per week.

Depositors also decided to approach various consumer organisations, including the Forum of Free Enterprises and the Consumer Guidance Cell, the police and the Reserve Bank.

Sources say the State Bank of India and the Reserve Bank have initiated a CBI inquiry against the group. As a fallout, one senior official was reportedly arrested by the Cuffe Parade police station last Thursday.

SBI, to which CRB owes over Rs 600 million, has the company's property in Jaipur as collateral.

Up to March 31, 1997, investors faced no problems with regard to interest accruals. However, after the RBI withdrew permission to accept deposits, the post-dated cheques for interest payments issued to depositors have been bouncing.

Last week the investors received a communique from CRB asking them to collect their outstandings in cash against their certificates across the counter. However, after paying a few depositors, CRB has been closing its Mumbai offices and also in various other cities.

Meanwhile, top CRB officials have either quit or are absconding. Chairman C R Bhansali could not be contacted at his residence. Former officials of the company said Bhansali might have left the country. Also untraceable were other senior CRB officials including Ashwin Shah, Suman Mittra, Ram Sharma. Former SBI managing director M K Sinha had quit CRB some time ago.

Meanwhile, CRB Share Custodian Services Ltd informed Bombay Stock Exchange last Thursday that it had discontinued its services as the registrar and share transfer agent for CRB Capital Markets and CRB Corporation Limited.

As on March 31, 1996, the net worth of CRB was Rs 4.37 billion and the loan funds Rs 2.02 billion. In the loan funds, the secured loans amounted to Rs 355 million and the unsecured loans Rs 1.67 billion. Out of this, Rs 4.13 billion is parked in current assets which might not be recoverable. The fixed assets were Rs 2.61 billion. Fixed assets on lease are Rs 1.97 billion, which might be difficult to recover and the owned assets are Rs 634.4 million, of which immovable property amounts to Rs 510 million. Other owned assets like computers and air conditioners are being shifted out.

As on March 31, 1996, CRB is said to have accumulated fixed deposits to the tune of Rs 130 crore, which was above the statutory limit of Rs 107 crore, from 1.75 lakh depositors. This is over and above the other liabilities.

Bhansali started the company in 1985 in Mumbai, but fell on bad days after the stock market slump in 1995. The group's mutual fund flop saw the company's profits fall. CRB is said to have expenditure higher than income and has made bad investment decisions. For instance, it purchased property in Nariman Point for Rs 6 crore (whose current market value is Rs 2 crore) for its proposed bank.