NSEL cri­sis: RBI says no pro­moter should con­trol any ex­change

The Financial Express - - MONEY & MARKETS - PTI

Mum­bai, Dec 30: With a so­lu­tion to the five-month-old R5,600- crore NSEL scam still elu­sive, the RBI has said it is not ad­vis­able to let a sin­gle group of share­hold­ers dom­i­nate the func­tion­ing of any ex­change. “The (NSEL) episode has em­pha­sised the need for en­sur­ing that no sin­gle share­holder or a group of share­hold­ers is per­mit­ted to dom­i­nate the func­tion­ing of the ex­change or ex­er­cise man­age­ment con­trol,” the RBI said in its half-yearly

RBI RE­PORT SAYS THE NSEL SCAM HIGH­LIGHTED THE GAP IN REG­U­LA­TION OF COM­MOD­ITY SPOT EX­CHANGES AND ADDS THAT ‘WE NEED TO COM­PRE­HEN­SIVELY AD­DRESS THE PROB­LEMS IN COM­MOD­ITY SPOT MAR­KETS’

Fi­nan­cial Sta­bil­ity Re­port re­leased on Mon­day.

The scam, which en­cir­cles the Jig­nesh Shah-led com­pa­nies, has “re­vealed cer­tain sys­temic con­cerns with re­gard to own­er­ship and gov­er­nance ar­range­ments in ex­changes and com­mon own­er­ship of ex­changes and ex­ist­ing tech­nol­ogy plat­forms”.

The RBI view comes within a fort­night of the sec­toral reg­u­la­tor FMC stat­ing in a re­port that pro­moter Shah and pro­moter com­pany Fi­nan­cial Tech­nolo­gies are not el­i­gi­ble to run the crip­pled ex­change, an or­der chal­lenged by the group in the Bom­bay High Court.

The RBI re­port says the scam high lighted the gap in the reg­u­la­tion of com­mod­ity spot ex­changes and adds that “we need to com­pre­hen­sively ad­dress the prob­lems in com­mod­ity spot mar­kets”.

It can be noted that the gov­ern­ment on July 30 or­dered clo­sure of the NSEL fol­low­ing ir­reg­u­lar­i­ties, which later re­vealed that the spot ex­change owed a whop­ping R5,600 crore in dues to thou­sands of in­vestors and dozens of bro­kers/in­ter­me­di­aries.

On De­cem­ber 18, in a se­vere in­dict­ment of the NSEL pro­mot­ers, com­mod­ity mar­ket reg­u­la­tor FMC said Shah and his firm Fi­nan­cial Tech­nolo­gies were not 'fit and proper' to run any ex­change in the coun­try and charged him with be­ing the "high­est ben­e­fi­ciary" in the NSEL scam.

In an 80-page or­der, the FMC held that FTIL is not a 'fit and proper en­tity' to hold any­thing more than 2% share­hold­ing in the MCX. FTIL cur­rently has 26% stake in MCX, the coun­try's largest com­mod­ity ex­change, and will need to cut its stake fol­low­ing the FMC or­der.

On De­cem­ber 20, NSEL de­faulted for the 19th time in a row pay­ing only R12.64 crore against an agreed amount of R174.72 crore.

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