The market regulator has once again barred Rose Valley from collecting money as investment in real estate and construction and repay the money collected from investors within three months
Market regulator Securities and Exchange Board of India (SEBI) has asked West Bengal-based Rose Valley Real Estate and Construction Ltd to wind up its collective investment schemes (CIS), issued through its real estate and construction unit, and repay money to investors within three months.
SEBI in an order, said, “….Rose Valley Real Estates and Constructions Ltd and its promoters/ directors, Gautam Kundu, Shibamoy Dutta, Ram Lal Goswami, Abir Kundu and Ashok Kumar Saha are directed to not to access the securities market and are further restrained and prohibited from buying, selling or otherwise dealing in the securities market till all collective investment schemes launched by Rose Valley Real Estates and Constructions Ltd are wound up and all the monies mobilised through it are refunded to the investors”.
Apart from these, Rose Valley has been asked to submit the 'trail of funds claimed to be refunded, “bank account statements indicating refund” to investors and “receipt from the investors acknowledging such refund.”
According to the SEBI order, the money collected by RVRECL through a scheme called 'Ashirbad' has increased to Rs2,016.32 crore from Rs1,358 crore during 1 April 2010 to 31 March 2011.
The scheme, SEBI points out, falls within the purview of the “collective investment scheme” definition of the market regulator.
Rose Valley had claimed that the CIS was discontinued in 2010.
Earlier in January 2011, SEBI had barred Rose Valley Real Estates & Construction from raising money from the public. The company was raising funds from the public in certain areas of West Bengal in the name of sale of plots of land under its Ashirbad scheme.
A Rose Valley spokesperson has however claimed that it will move to Special Appellate Tribunal (SAT) against the SEBI order. It would also question the figure of Rs2,000 crore of deposits that the market regulator claims it to have raised, says a report from the Hindu Business Line.
“Repayments are made every day and at present the company is yet to pay Rs175 crore of an earlier mentioned amount of Rs1,274 crore. The repayment would be made over the next three months in accordance with the SEBI order,” he said adding that there hasn’t been a single investor complaint against the company on non-repayment of dues.
However, SEBI in its order has mentioned that Rose Valley has till date not provided any documentary evidence to substantiate its claim that it has refunded the money to the investors.
Small borrowers immediately have their collaterals confiscated on default, but big industrial borrowers don't seem to suffer the same fate
The state of India's banking system does not garner as much attention as it should. With our layers upon layers of public sector banks and lending practices, our banking system is heading into troubled waters, if something drastic is not done soon.
Consolidation of public sector banks
All 26 public sector banks including State Bank of India (SBI) and it’s subsidiaries and associates should be merged and consolidated into 6 Banks as under:-
A. Central India Bank Ltd.
B. North India Bank Ltd.
C. South India Bank Ltd.
D. West India Bank Ltd.
E. East India Bank Ltd.
F. North Eastern India Bank Ltd.
The initial cost of such consolidation will pay back handsomely in no time, in terms of better efficiency, lesser operational costs and scale of operations besides other benefits.
RBI's core functions:
Reserve Bank of India (RBI) has to perform multiple and numerous functions single handily and is extremely overburdened despite having one full time Governor and four Deputy Governors.
It may be better if some of its following secondary functions are devolved upon a separate banking & financial regulatory authority.
a. Regulation and control of regional rural banks.
b. Co-operative rural banks.
c. Regulation and control of chit fund and Nidhi companies, money circulating and mobilising schemes.
d. Regulation of micro finance companies and gold finance companies.
e. Regulation and control of non banking finance companies etc.
Massive irregularities in disbursement of loans by PSU banks
Financial Express reported in March that for every rupee lent by banks in India, 13 paise have turned into bad loans. No strict actions seem to be forthcoming for the known defaulters or the bankers. Especially considering that small borrowers immediately have their collaterals confiscated on default, but big industrial borrowers don't seem to suffer the same fate.
The various and scattered laws on banks and financial institutions as under should be consolidated in to two laws namely INDIAN BANKING ACT and INDIAN FINANCIAL INSTITUITIONS ACT, with adequate and effective provisions, and strict rules for quick recovery of bad or sticky loans.
1. Banker’s books evidence act 1891
2. Agriculturist loans act 1884
3. Banking regulation act 1949
4. IDBI bank act 1964
5. State bank of INDIA act 1955
6. SBI (subsidiary banks) act 1
7. State bank of Hyderabad act 195
8. State associated banks act 1
9. Exim bank act 1981
10. National housing bank act
11. Regional rural banks act 1976
12. SIDBI Act 198
13. Banking Companies acquisition and transfer act 1970/1980
14. State financial corporation act 1951
15. Unit trust of INDIA act
16. Recovery of Debts due to Banks & Financial Institution Act, 1993
17. Securitization and Reconstruction of financial Assets and Enforcement rules 2002
The nexus between bankers and businessmen needs to be broken or atleast addressed, Moneylife has written before about how rising NPAs are affecting the solvency of India's prestigious public sector banks. For a more detailed view on this specific issue please read our previous article here.
You may also want to read...
Building a Better India-Part1: How to create a smaller and smarter government
Building a Better India-Part2: Transforming political landscape
Building a Better India – Part 3: Bringing systemic changes in constitutional bodies
Building a Better India – Part 4: Identifying tax issues
Building a Better India – Part 5: Bringing tax reforms
Building a Better India – Part 6: Fast track clearances
Building a Better India – Part 7: Managing India's Deficit
Building a Better India – Part 8: Boosting Coal Production
Building a Better India – Part 9: Boosting Hospitality and Tourism
(Kolkata-based Dalbir Chhibbar practised as a CA till 1990 and later started his own buinsess)
Typically, a roof top 1 kV system or solar power panel would cost Rs1 lakh and the government provides certain subsidy for its citizens and industries. Railways would come under essential services and it possibly can get a better deal from the government
It may be recalled that the Railway's interim budget for United Progressive Alliance (UPA) government was presented by Mallikarjun Kharge, which was not implemented, and which has proposed certain unavoidable hikes in fares. DV Sadanand Gowda, the new Railway Minister has now the difficult choice of modifying the proposals made earlier and also include his own vision of what Railways ought to do in the next five years. His plans are expected to be reflected in his budget that is likely to be presented early next month.
According to the press reports, Sadanand Gowda wants to pursue issues of dedicated freight corridors, dedicated coal circuits and increased and better facilities for passengers. But for doing all these, he needs to secure funds, some of which he may seek from the Coal Ministry. Or better still, he could seek to have joint ventures with the Coal India Ltd, which is flush with funds!
Meanwhile, he has no choice but to increase the revenues by higher fares and increased freight charges.
In the last fiscal, fuel costs have gone up by about 30% due to increased cost of diesel, lower indigenous coal supply and inadequate use of existing resources. In fact, in the last 60 years, Gowda has stated, Railways has not modernised, and his plans are likely to be revealed when presenting his budget.
The Indian Railways network covers 65,000kms route; carries 20 million passengers and 2.9 million tonnes of cargo every day. Their own electricity bill is expected to touch Rs10,880 crore this fiscal and the total fuel cost has shot up to Rs 28,471 crore. About 37% of the 65,000 kms route has now been electrified, and, as of now the Power Ministry has clarified that the Railways have a "deemed licensee status", to transmit, distribute and trade power. Sadanand Gowda can buy power directly from surplus power producing states like MP, Gujarat, Odisha, Chhatisgarh and Haryana, at a slightly cheaper price than from discoms!
Is there anything else that the new minister Sadanand Gowda can do that can have far reaching implications for the Railways? Yes, here are some ideas that he can have his Research and Development (R&D) Team to work on. This is based on the press reports that typically a roof top 1kV system (solar power panel) would cost Rs1 lakh and the government provides certain subsidy for its citizens and industries. Railways would come under essential services and it possibly can get a better deal from the government. So, Sadanand Gowda can direct his team to:
- carry out a study and seek a manufacturer to design a roof-top solar panel (s) for passenger coaches
- design a modified version that can be fixed on closed luggage vans
- design a third version that would be fitted on the top of open wagons, such as those that carry coal, iron ore etc
- design the system to collect the solar power to be stored in a centralized battery, which could be removed at the end of the day and replaced by a new one; those fully charged batteries may be connected to a power grid for consumption
- and or design the panels in such a way that the power is routed to a central battery system, possibly installed in a bogey, that can be disconnected at given points enroute and replaced by a new bogey to collect power the next day when the railways move!
We must remember that all our moving railway passenger cars, luggage and open wagons could be utilised to generate solar power, as they are on the move, in the open, during the day. It is this solar power that we need to tap!
Or is this a pipe dream? The writer feels that solar power engineers could come out with some such feasibility, it would make a huge difference to the power starved country. Such an idea can be used on all moving vehicles like buses, tourist coaches etc
Sadanand Gowda would have no problem in getting such a mandate to experiment from the Prime Minister himself, who in Gujarat implemented the setting up of solar panels on the Narmada branch canal near Chandrasan village of Kadi taluka in Mehsana district.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)