NSEL crisis: RBI says no promoter should control any exchange
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.