Haven't we heard the judiciary often lament about routinely tardy and occasionally compromised investigation being the bane of the justice delivery system? While that is projected as the 'truth', it does not appear to be the complete truth. What would you do if one chooses to stubbornly refuse to change one's opinion or course of action or chooses forbearance over forthrightness?
It all appears to have started sometime in May 2011, in a meeting of the sub-committee of the Financial Stability and Development Council (FSDC). Doesn't the name itself overwhelm you? Well, it didn't overwhelm an unscrupulous promoter of a Public Financial Institution (PFI), the very same specie that the FSDC is supposed to lord over and keep in check.
A bare reading of the minutes of that meeting, which aren't couched in financial latin, fortunately, made two things abundantly clear to the mandarins in the room. National Spot Exchange (NSEL) was not regulated by anyone in that room and since it is not regulated, the banks providing clearing services to NSEL must be asked to stop doing so forthwith, since it is a clear violation of the Payment and Settlement Systems Act (PSS).
The FSDC comprises representatives of the RBI, SEBI, FMC (since then merged with SEBI), IRDAI and PFRDA -all grandees of the financial regulatory world.
A lay person may wonder what would happen if the banks stop providing clearing services to NSEL. Plain speak, it shuts NSEL down, which is what the minutes did not emphatically say, but should have.
That would have meant that the scam which ballooned over to a whopping Rs 5,600 crore, could have been nipped in the bud, the outstanding exposure being Rs 1,000 crore at that time.
What must be said in their defence, however is, they did write a letter to someone, whom they thought would do something about it. Bravo.
On July 31, 2013, NSEL went spectacularly bust. Most lay people shouldn't be grudged their naivete, if they thought that these agencies would have initiated prosecution, after NSEL went bust.
The aggrieved investors have had to invoke the writ jurisdiction of different high courts to get these regulatory agencies to even initiate a probe.
One such writ petition has been heard and seems to have been grudgingly complied with, while few others are yet to be heard.One of the writ petitions pending adjudication, should worry all of us, particularly in the postdemonetisation India. The PSS Act enjoins RBI to prosecute every instance of default in any "payment system".
According to an audit report by Grant Thornton, there were over two thousand payment default instances in NSEL. Each of the digital payments service provider is a "payment system", over which the RBI alone has regulatory oversight.
We sincerely hope, that those who are recent converts and believers in "digital money" do not get a proverbial 440-volt shock some day , the kind we are still reeling under.
Another interesting twist to the tale is that of insurance.NSEL had insured the "goods" in their warehouses, which are nowhere to be found. The insurance companies have rejected their claim, according to whom, NSEL is complicit in the fraud.Apparently, the insurance regulator IRDAI has also arrived at the same conclusion.
NSEL has filed an appeal in the High Court against their order.We sincerely pray the High Court arrives at a conclusion sooner than later, in which case, either the insurance money is available to be distributed to investors, or the High Court upholds the IRDAI view. The question as to whether NSEL is complicit in the fraud is germane to the controversy in more ways than one.
Whether we are a restive insolent lynch mob or exasperated victims, aggrieved by the utter lack of sensitivity of the powers that be, only time will tell. But we will keep knocking at their doors trying to awaken their conscience.
It all appears to have started sometime in May 2011, in a meeting of the sub-committee of the Financial Stability and Development Council (FSDC). Doesn't the name itself overwhelm you? Well, it didn't overwhelm an unscrupulous promoter of a Public Financial Institution (PFI), the very same specie that the FSDC is supposed to lord over and keep in check.
A bare reading of the minutes of that meeting, which aren't couched in financial latin, fortunately, made two things abundantly clear to the mandarins in the room. National Spot Exchange (NSEL) was not regulated by anyone in that room and since it is not regulated, the banks providing clearing services to NSEL must be asked to stop doing so forthwith, since it is a clear violation of the Payment and Settlement Systems Act (PSS).
The FSDC comprises representatives of the RBI, SEBI, FMC (since then merged with SEBI), IRDAI and PFRDA -all grandees of the financial regulatory world.
A lay person may wonder what would happen if the banks stop providing clearing services to NSEL. Plain speak, it shuts NSEL down, which is what the minutes did not emphatically say, but should have.
That would have meant that the scam which ballooned over to a whopping Rs 5,600 crore, could have been nipped in the bud, the outstanding exposure being Rs 1,000 crore at that time.
What must be said in their defence, however is, they did write a letter to someone, whom they thought would do something about it. Bravo.
On July 31, 2013, NSEL went spectacularly bust. Most lay people shouldn't be grudged their naivete, if they thought that these agencies would have initiated prosecution, after NSEL went bust.
The aggrieved investors have had to invoke the writ jurisdiction of different high courts to get these regulatory agencies to even initiate a probe.
One such writ petition has been heard and seems to have been grudgingly complied with, while few others are yet to be heard.One of the writ petitions pending adjudication, should worry all of us, particularly in the postdemonetisation India. The PSS Act enjoins RBI to prosecute every instance of default in any "payment system".
According to an audit report by Grant Thornton, there were over two thousand payment default instances in NSEL. Each of the digital payments service provider is a "payment system", over which the RBI alone has regulatory oversight.
We sincerely hope, that those who are recent converts and believers in "digital money" do not get a proverbial 440-volt shock some day , the kind we are still reeling under.
Another interesting twist to the tale is that of insurance.NSEL had insured the "goods" in their warehouses, which are nowhere to be found. The insurance companies have rejected their claim, according to whom, NSEL is complicit in the fraud.Apparently, the insurance regulator IRDAI has also arrived at the same conclusion.
NSEL has filed an appeal in the High Court against their order.We sincerely pray the High Court arrives at a conclusion sooner than later, in which case, either the insurance money is available to be distributed to investors, or the High Court upholds the IRDAI view. The question as to whether NSEL is complicit in the fraud is germane to the controversy in more ways than one.
Whether we are a restive insolent lynch mob or exasperated victims, aggrieved by the utter lack of sensitivity of the powers that be, only time will tell. But we will keep knocking at their doors trying to awaken their conscience.
No comments:
Post a Comment