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Shyamala Gopinath's controversial appointment

Former RBI Deputy Governor's appointment as NSE director raises too many questions
Reserve bank of India's (RBI) former deputy governor, Shyamala Gopinath taking over as director of the extremely profitable, near-monopoly National Stock Exchange (NSE) has raised serious issues of conflict of interest.
The issue in a nutshell is this: Will the prospective of lucrative directorships make regulators go soft towards regulated entities? The clear answer is yes. While NSE appears and is a first-level regulator itself, the problem in this case arises out of its own stated position.

The NSE insists it is a private company and has even been fighting the applicability of the Right to Information (RTI) Act in every forum. It appealed a ruling of the Chief Information Commissioner (CIC) before the Delhi High Court and after losing there, has appealed to a divisional bench. If NSE is right, the same scruples that ought to prevent Ms Gopinath from joining the board of say other private sector entities ought to apply to her directorship at the NSE as well.

However, there is another even more controversial issue. While the NSE is not under RBI regulation, the currency derivatives segment is under the dual regulation of SEBI and RBI. This was directly under Ms Gopinath's regulatory purview and she inaugurated all four currency bourses - that of the NSE, the Bombay Stock Exchange (BSE), MCX-SX and the United Stock Exchange. The regulator's role in this segment is nothing short of controversial with both RBI and SEBI choosing to maintain a studied silence on two major issues - first, the fact that the NSE used its profits in running a near-monopoly stock market to fight competition in forex market by not charging a fee for currency trades. In other words, the NSE operated the currency market without a source of revenue, forcing all three competitors to do the same inflicting huge losses on them.

Interestingly, both SEBI under CB Bhave and the RBI where Ms Gopinath was a Deputy Governor, maintained complete silence about this anti-competitive stance of NSE. After unsuccessfully appealing to the regulators, MCX-SX which was NSE's main rival approached the Competition Commission of India (CCI) and won a pathbreaking order.

The CCI not only ruled against the NSE, but also slapped a fat fine on it. While NSE has appealed the fine, it has corrected itself and begun to charge a fee.

What is more important in the regulatory context is that RBI and SEBI were not only guilty of not acting against this obvious anti-competitive action despite a wide debate in the media, but their silence encouraged other malpractices as well.

For instance, the big mystery in the battle over anti-competitive practices is the fact that both BSE and USE did not protest. The BSE's currency derivatives segment quickly folded up and it later invested in the USE and offered its trading platform to the fourth bourse. The USE was the only standalone exchange of the four without income from a commodity or equity bourse to subsidize losses in the currency segment. The USE refused to answer Moneylife's repeated queries about its long-term business model, since its currency derivatives trades collected no fees. The USE also outrageously announced a first day trading volume which was more than that of the NSE and MCX-SX combined with one firm, Jaypee Capital, accounting for 80% of the trading volume. Again, the watchdogs did not bark - in fact they didn't so much as whimper. As Sherlock Holmes would say, therein lies the mystery about the regulator's influence.

The USE's operations, as it turns out are riddled by dubious practices that were steadfastly ignored by the two regulators and this when Moneylife had raised questions about its long term survival on the very first day - It is only after a regime change at SEBI and at the RBI that the USE's operations are being investigated. Last week, a report in The Economic Times says that SEBI has found abnormal trading patterns. In fact, this abnormality was evident on the very first day, when USE boldly issued a press release to celebrate its turnover bubble.

SEBI, which has used potential conflict at the reason for denying permission to MCX to launch an equity segment, is strangely silent about the clear conflict in case of Jaypee Capital and USE. In fact, the promoter's son Gaurav Arora was even been appointed President of the bourse.

Six days ago, The Economic Times in a report about SEBI's board meeting said, "There have been reports about a conflict of interest and a possible breach of fair-trade practices at the USE due to one of its largest shareholders, Jaypee Capital, also being a major trader on the exchange.

There have also been reports that the trade volumes might have declined after Jaypee capital started limiting its exposure due to the SEBI probe".

Under the RBI and SEBI's benign watch two out of the four currency derivatives bourses, which were launched in quick succession are in the doldrums. Can we then believe that there is no conflict of interest in regulators being too entwined with regulated entities or seeking post-retirement sinecures with them?

Launches NSE currency exchange:
1. NSE -
2. BSE: and
3. USE: 21st September 2010
4. MCX-SX: October 2008



Babubhai Vaghela

3 years ago

Why HDFC Bank want this lady Shyamala Gopinath as Chairperson?


5 years ago

If this blatant act of favouritism cannot be stopped, there is no hope for us Indians who are already groaning under a corrupt beaurocracy and ineffective government. I appeal to Moneylife to file a PIL in supreme court against this appointment, and if required, I am prepared to contribute financially towards the cost. I am sure many other readers would do same.

P K Biswas

5 years ago

Your continuous efforts to cleanse the financial system is laudable. Gone are the days when the RBI top executives retired with dignity. During the last one and half decade most of them got themselves jobs so quickly after their lretirement that one has doubt whether they got the offers even when in service. Looking forward to the opening of the P's box.

dayananda kamath k

5 years ago

this govt has penchant for making contravercial appointments. that is why there is so much of curruption and corporate governance issues.

Melvin Joseph

5 years ago

Good Article explaining, how yes boss Babus are accommodated well even after retirement.
This was common in many other sectors which was opened up for private players. I was with a public sector insurance company till 2000 and joined private sector in 2000. My interview board chairman was a retired PSU insurance company chairman.This person was known for helping a private sector petroleum company by way of lot of fraud claims when he was in service. After retirement, he was absorbed by the same private player as advisor to it's insurance business.
I understand that he is still in that company. I am sure, the company is taking good care of him, because of his support during his term with the PSU insurance company as chairman.
While the private company benefited with many Crores of tax payers money, now this person is happy with few lakhs of this company.

Dr Vaibhav G Dhoka

5 years ago

Our authorities became stubborn.They care for their own interest none is concerned about common public.Due to their stubbornness their are few people in government bodies who are generally juniors to retiring officers dare not prevent such appointments. What is left is judicial intervention but in our Judicial system till verdict is out much damages are happened to institution to which such person is appointed.

Nagesh Kini FCA

5 years ago

NSE claims it is a 'private' company, so does BCCI though claiming to be 'not-for -profit' set-ups. Since when has private and public come up in Sec.25 or Societies?
This requires a serious revisit to the Companies and DTC Bills as also the Trust laws to amply clarify their public domain status.

N Narayanan

5 years ago

Ms.Sucheta Dalal may your tribe increase.We look upon you as Moral policeman who has the courage and strength to call spade a spade,and your relentless pursuit

p v maiya

5 years ago

Absolutely wrong for ms Gopinath to get into NSE.
However all of this indiscretion has a root cause. Honest officers do not save enough during their carreer to live comfortabley post retirement. It is time to to grant all senior level officers like Dy. Govenors, bank chairmen , secretaries of Govt , Supreme court judges a hefty pension so that they are not tempted to look for a Board director position or heads of tribunals etc for maintaining a reasonable standard of living.


Dr KS Rao

In Reply to p v maiya 5 years ago

Mr Maiya, Will you please also ask SBI to pay its old pensioners on par with present pensioners, ie 50% of the present last pay? SBI has grown to its present stature because of the hard work of old timers who worked until 1 am each night, yet get a measly pension utterly inadequate to live decently these days.


5 years ago

as usual, a great expose by sucheta dalal. this is journalism of courage and intellect put together. it shows how corrupt and arrogant are the people at top. only god can save our country. thanks sucheta for facilitating god's cause!


5 years ago





5 years ago

What a shame. A totally undistinguished career in RBI topped by further rewards in retirement


5 years ago

RBI is above the law and RBI officers are like Maharajas (and Maharanis)

R Balakrishnan

5 years ago

PSU cadres are a cosy club. Retirement opens the doors to new riches and an extended sinecure for two to five years, making a mockery of the concept of retirement age. So long as you are nice to the powers that be in the last two years of your job, unlimited riches are yours. This post retirement tamasha is a hall mark of PSU's, making a mockery of the retirement age. However, if you do not lick enough boots, then thou shalt not get good sinecures post retirement.



In Reply to R Balakrishnan 5 years ago

Well said, absolutely true. All you have to do in the last few years of your job is to do absolutely nothing, so that you escape any possibility of involvement in a fraud, and then get a cushy job for another five years.
During your service, you also have to be outstandingly mediocre.

Delhi, Mumbai slip in APAC realty rankings, Bangalore holds on


The report, which provides an outlook on Asia-Pacific real estate investment and development trends, said the economic problems in the US and Europe “are weighing upon local economies across the Asia-Pacific region as well as the investor sentiment in Asia and Australian real estate markets”

New Delhi: Delhi and Mumbai have slipped in an Asia-Pacific (APAC) real estate investment opportunities list for 2012 owing to economic and inflationary issues, reports PTI quoting a joint report by the Urban Land Institute (ULI) and PwC.

The report, titled, ‘Emerging Trends in Real Estate Asia-Pacific 2012’, found Delhi and Mumbai dropped from fifth and third place in last year’s list of real estate investment prospects to 12th and 15th position, respectively, in 2012.

However, Bangalore maintained its position as the 10th most favoured investment destination in the Asia-Pacific real estate space.

“Bangalore continues to be a stable play. It never crashed when the sub-prime crisis hit and it didn’t rocket up even when the markets were doing well in 2006-07. It's a very organic, growth-driven market,” the report noted.

In terms of development prospects, Bangalore gained two positions to rank seventh in 2012, while Mumbai dropped dramatically from first to 10th place and Delhi fell from second to 13th place.

The report said vacancy rates are likely to remain stable in Mumbai in 2012. Furthermore, while absorption will be positive again, rental values remain questionable, as economic and inflationary issues linger.

About Delhi, the report said, “Inflation has continued to spike costs and it may not be economically feasible to build there... Ongoing funding problems do provide investment opportunities for private equity investors.”

The report said, “India’s economy continues to produce the second-fastest growing gross domestic product in the Asia-Pacific region, just behind China, but developers face great difficulty raising capital through the nation’s banking system.”

“Within the country, investment prospects are brightest for Bangalore; however, respondents noted concern about the economy in general. Rankings plummeted for New Delhi and Mumbai, both affected by inflation concerns,” it added.

Meanwhile on the Asia-Pacific level, Singapore and Shanghai have retained their first and second ranking, respectively, as property investment hotbeds.

Sydney replaced Mumbai as the third-most preferred destination, followed by the fast-growing Chinese city of Chongqing and Beijing.

In the development category, Shanghai bagged the third rank, followed by Chongqing, Beijing and Jakarta.

The report, which provides an outlook on Asia-Pacific real estate investment and development trends, said the economic problems in the US and Europe “are weighing upon local economies across the Asia-Pacific region as well as the investor sentiment in Asia and Australian real estate markets.”

The study, which is based on the opinions of more than 360 internationally-renowned real estate professionals, including investors and developers, noted that overall, respondents were slightly less positive about the outlook for Asia-Pacific countries than a year ago.



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