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Karvy Comtrade delays making payouts to commodity clients – Economic Times

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Karvy Comtrade, the commodity business of the troubled Karvy Group, is facing problems making payouts to some of its clients. The development comes amid stock exchanges BSE and NSE suspending the license of Karvy Stock Broking for allegedly misusing clients’ securities and Sebi barring the stock broker from taking on new clients.

While a Karvy official confirmed “some delay” in making payouts to clients, he blamed the same on the castor fiasco on agri bourse NCDEX.

“Yes, there has been some delay in issuing the payouts due to the castor episode,” he said. “Around 30 clients’ payout is under process to the tune of about Rs 5.50 crore. This delay is due to the receivable to the tune of around Rs 10.38 crore from the castor trading clients who have made losses in castor trades in NCDEX.”

Asked whether the commodity business was staring at a liquidity crisis, the spokesperson said, “There is no cash crunch in the Commodities broking business. However, our cash flow has been affected due the above reason (delay in recovery of money from clients who lost on castor futures).

The delays come on the heels of NSE and BSE suspending the license of Karvy Stock Broking from all segments on the exchanges for allegedly misusing clients’ securities, a bulk of which have been returned to the clients’ demat accounts. Sebi on November 22 ordered Karvy Stock Broking against taking on new clients and given it three weeks to respond to its order.

Karvy Comtrade was one of the brokers whose clients long castor futures had defaulted in margin obligations after the commodity fell over 20% in late September-early October. The exchange’s clearing corporation has recovered the dues from “defaulting” members deposits with it by a process known as partial tear-up wherein counterparties short castor were compensated. Karvy Comtrade is now trying to recover the dues from their clients who failed to honour their mark-to-market obligations.

Market regulator Sebi is keeping a close watch on the commodity business of the group which has membership of MCX, NCDEX and ICEX. It has also sought a complete report from commodity exchange NCDEX on the castor issue