While making sure that FTIL takes responsibility to resolve the payment crisis at NSEL at the earliest, the government should takeover management of FTIL, the FMC said
Commodities market regulator Forward Markets Commission (FMC) on Tuesday said it has recommended the government to consider merging crisis hit National Spot Exchange Ltd with its promoter Financial Technology India Ltd (FTIL) for recovering dues of over Rs5,300 crore from defaulters.
Both the ministries of Corporate Affairs (MCA) and Finance (MoF) are studying the feasibility of implementing the FMC's proposals.
"The Commission, vide its letter dated 18th August, has recommended to the MCA to consider the merger/ amalgamation of NSEL with FTIL in public interest so that the human and financial resources of FTIL are also directed towards facilitating speedy recovery of dues from the defaulters at NSEL," FMC said in its latest report.
The recommendation has been given to the government in view of the depleted resources in terms of manpower and financial strength available at the disposal of NSEL, it said.
Also, "NSEL as a corporate entity has now been rendered bereft of any credibility and now seems financially and physically incapable of effecting any substantial recovery from the defaulting members," it observed.
The regulator has also recommended the government to consider taking over of the management of FTIL, thereby ensuring the company takes full responsibility to resolve the payment crisis at NSEL at the earliest.
Taking over the FTIL management will help manage the affairs of the company in in a professional way by bringing in an institutionalised framework as recommended by the Working Group appointed by the government, it added.
NSEL, a subsidiary of the Jignesh Shah-led Financial Technologies India Ltd, has recovered a little over Rs360 crore of dues from defaulters so far out of the total outstanding amount of Rs5,689 crore.
Recently, FMC had said that the NSEL has not made much progress in recovery of dues from defaulters, which the spot exchange refuted, saying the watchdog has adequate powers to speed up efforts to get back the investor money.
Will whistleblowers’ missives work?
Even as Subrata Roy is working on a 15-day extension to meet the Supreme Court’s condition to release him from jail, a whistleblower has, after many efforts, managed to catch RBI’s attention on the issues at Sahara India Financial Corporation Limited (SIFCL).
This is a residuary non-banking company which is under RBI supervision. SIFCL was barred from accepting any fresh public deposits in June 2008 and asked to repay existing deposits as and when they mature. In 2011, RBI issued a notice warning depositors about Sahara which also said it would not guarantee repayment of deposits by SIFCL or other group entities. A similar warning was issued by the market regulator.
Little information is available in the public domain about SIFCL, except a fact sheet which says that one Mr Madhukar and BM Chaturvedi are independent directors and Om Prakash Srivastava is a whole-time director of the company as of 5 September 2014. This means that Subrata Roy, who was the chairman of SIFCL, has also stepped down and there is no immediate family member on the board. Nobody is designated chairman either.
This means that the two independent directors, Mr Madhukar and Mr Chaturvedi, who are accused by the whistleblower of colluding with various entities to sell off assets belonging to depositors, form a majority on the board. He claims in a letter to RBI that over Rs500 crore had already been diverted until September this year. The whistleblower also alleges that the two independent directors have been improperly appointed without seeking prior approval from RBI.
Who are these directors? Mr Madhukar is on the board of several Sahara group companies including its mutual fund and Sahara Infrastructure & Housing Limited (SIHL). More importantly, he is a former whole-time member of the Securities & Exchange Board of India (SEBI) and former chairman of United Bank of India.
Mr Madhukar’s faith in Sahara and loyalty to the pariwar seems unshakable, despite all the allegations against the group. He has stayed on, even when another loyalist, Amitav Ghosh, a controversial former deputy governor of RBI, stepped down as independent director on the SIHL board in April 2013 (well after the path-breaking Supreme Court order asking two Sahara group companies to refund Rs25,000 crore raised through hybrid convertible bonds without SEBI approval). Mr Madhukar stepped in to replace by Mr Ghosh on that board.
On 20th August, RBI’s Kanpur office wrote to the whistleblower that the “two issues flagged by you are being examined by our Central Office at Mumbai.” It remains to be seen if RBI will act in time or take shelter behind a long-drawn ‘examination’ of issues. The whistleblower’s emails seem to suggest that nothing has changed at Sahara pariwar.
As for RBI, the stringent action by the Supreme Court has apparently not made this regulator more vigilant about the goings on at this controversial group.
Narendra Modi set twitter records
Prime minister (PM) Narendra Modi is now acknowledged as a master communicator.
His massive electoral victory was a powerful and carefully choreographed multi-dimensional effort, but his big initial breakthrough was in bypassing a hostile mainstream media and reaching out to people directly through social media.
The PM is now using the very same tools to win friends and followers globally with spectacular results, so much so that his tweets to heads of State or the people of Japan (in Japanese) are rewriting the rule book for diplomacy.
After his 100 days in office, Twitter put out a blog post noting some of the new records set by Mr Modi. It says, @narendramodi is the second most followed politician in the world after US President Barak Obama on Twitter. Mr Modi’s election victory tweet, “India has won” (in Hindi and English) is the most re-tweeted tweet (70,620 times) of all times from India.
Today, following @narendramodi and @PMOIndia has become a necessity for diplomats, journalists, companies and policy-makers, since Twitter remains the primary communication tool of India’s prime minister. Given India’s population and the continuous accretion to the number of people acquiring smart phones, mobile connectivity and access to social media, it is only a matter of time before Narendra Modi becomes the most followed politician in the world.