New Delhi: The Calcutta Stock Exchange (CSE) may just have celebrated its final Kali Puja and Diwali amid reports of closure following years of legal and financial struggles in the wake of the Rs 120-crore Ketan Parekh market manipulation scam of 2001.
The CSE, one of India’s oldest bourses, is moving towards a voluntary exit and reports indicated it was gearing up to “celebrate its last Kali Puja and Diwali on 20 October as a functioning exchange”.
CSE in a statement, however, denied a PTI report quoting its chairman saying this Diwali was the last for the bourse and asserted that he had not talked to the media “in the matter of CSE Diwali and sale of land of CSE”.
Nonetheless, the exchange, where trading stopped long ago in April 2013, is on the verge of completing exit formalities with the market regulator Securities and Exchange Board of India (SEBI) after grant of shareholder approval.
Established in 1908, the CSE was India’s second recognised bourse after the Bombay Stock Exchange (BSE). It once competed with the BSE in terms of trade volume and investor interest and served as the financial hub of Kolkata.
Its decline began following the Ketan Parekh scam that caused a payment crisis at the exchange and broker defaults on settlements. Trading fell over subsequent years. Compounded with years of regulatory non-compliance, controversies, and declining relevance in a technology-driven sector, the CSE slowly lost its status as Kolkata’s financial icon.
Trading was officially terminated in 2013, when the SEBI prohibited the CSE over non-compliance with regulatory requirements, such as maintaining the mandatory turnover threshold and establishing a separate clearing corporation. Since then, the CSE’s sole purpose has been to enable its members to trade via tie-ups with the National Stock Exchange (NSE).
To restore operations, the exchange challenged the SEBI’s orders in the Calcutta High Court and the Supreme Court but it only added to its financial strain. Last December, the CSE board decided to withdraw the pending legal cases and begin a voluntary exit process. The formal application for withdrawal was submitted to the SEBI on 18 February. Later on, the shareholder approval was submitted at a general meeting on 25 April, PTI reported.
Once the SEBI clears the exit from stock exchange activity, the CSE will function as a holding company, while its 100 percent subsidiary, CSE Capital Markets Pvt Ltd, continue broking as a member of the NSE and the BSE.
The regulator has also approved the sale of the CSE’s three-acre property on EM Bypass to the Srijan Group for Rs 253 crore, which is scheduled to be executed after exit sanction from the SEBI, according to reports in the media.
“Approval has been obtained from the shareholders relating to the exit of the stock exchange business. Accordingly, CSE submitted the exit application to the SEBI, which has appointed a valuation agency to undertake valuation of the stock exchange,” CSE chairman Deepankar Bose was quoted as saying by PTI. The valuation is a necessary step for final approval for withdrawal.
In a statement, CSE, however, said: “We categorically state that Mr Deepankar Bose has not talked with any journalist on the matter of CSE Diwali and sale of land of CSE.”
As part of its restructuring, the exchange introduced a Voluntary Retirement Scheme for all employees, resulting in a one-time payout of Rs 20.95 crore. All employees opted into the system, with some remaining on contract for compliance tasks.
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The Ketan Parekh saga
The downfall can be traced to the tremors unleashed by the 2001 Ketan Parekh scam, which exposed deep structural frailties in India’s regional markets.
Parekh, a chartered accountant-turned-stockbroker, masterminded a speculative stock market bubble built on a select clutch of technology, media and telecom stocks—dubbed the “K-10” scrips.
By using circular trading, funding from cooperative banks like Madhavpura Mercantile Cooperative Bank, and a network of front companies, Parekh artificially inflated share prices, creating an illusion of unstoppable market momentum.
When the bubble burst in early 2001, following the Union Budget and a broader market correction, panic selling swept through the exchanges. According to the Joint Parliamentary Committee Report on Stock Market Scam and Matters Relating Thereto (2002), the chain of defaults that followed caused severe liquidity stress across smaller exchanges.
The CSE, which had a large number of brokers dealing in speculative scrips and limited clearing margins, was among the worst hit. Payment crises erupted as several brokers failed to meet their obligations. Settlements were delayed, payouts were frozen, and confidence among investors and sub-brokers evaporated almost overnight.
In Kolkata, the crisis exposed how thinly capitalised many local brokers were and how heavily dependent they had become on borrowed funds and informal credit lines. The absence of robust clearing mechanisms—unlike the more automated systems in place at the NSE and the BSE—amplified the damage.
Reports from the period show that the CSE saw massive defaults by member brokers, leading to temporary suspension of trading and a wave of investigations by the SEBI.
The episode also led to the resignation of key exchange officials and the erosion of investor trust that had sustained the CSE’s dominance in eastern India since its founding.
While the Ketan Parekh scam was not the sole reason behind the CSE’s downfall, it marked the beginning of the end. The dotcom boom of the early 2000s also dealt a blow to the old exchange as it struggled to transition to a tech-led financial system.
The exchange never recovered its pre-2001 stature. Over the following decade, trading volumes migrated to the NSE and the BSE, which offered greater transparency and technological efficiency.
What had once been a pillar of regional financial activity became a casualty of India’s shift toward a consolidated, technology-driven national market—a transformation catalysed by aftershocks from one of the nation’s most infamous financial scandals.
(Edited by Nida Fatima Siddiqui)
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