Govt Looking into Lapses at NSE; SEBI’s Handling of the Case: FM Sitharaman
Moneylife Digital Team 22 February 2022
The Union government is looking at the lapses that took place at the National Stock Exchange (NSE) says finance minister (FM) Nirmala Sitharaman.
Addressing a press conference in Mumbai, the FM says, “Although you would perceive those charges involving NSE matter are well-established, I do not want to pre-empt the matter. I am going through the details and come back after that.”
Earlier, in an interview to Economic Times, Ms Sitharaman says the Union government is examining the matter to determine if the Securities and Exchange Board of India (SEBI) has taken ‘necessary punitive’ action in the case. 
“…the government was analysing if there had been ‘enough application of mind in dealing with this’ on the part of the market regulator, and if after applying its mind, SEBI took adequate corrective steps. The government will not entertain or tolerate any perception among investors about opaqueness and credibility at institutions,” the FM told the newspaper. 
Market regulator SEBI recently penalised Chitra Ramkrishna, former managing director (MD) and chief executive officer (CEO) of NSE for passing sensitive information about the Exchange to an unknown or faceless spiritual force residing in the Himalayas.
In an order issued on 11 February 2022, SEBI barred Ms Ramkrishna, Ravi Narain, former vice-chairman and Anand Subramanian, former GOO and adviser to MD and CEO, from associating with any market infrastructure institution (MII) or any intermediary registered with SEBI. 
While imposing a monetary penalty of Rs3 crore on Ms Ramkrishna, the market regulator has asked NSE to forfeit her excess leave encashment of Rs1.54 crore and the deferred bonus of Rs2.83 crore. The market regulator also restricted NSE from launching any new product for six months. 
Based on the 192-page order passed by the SEBI, the Central Bureau of Investigation (CBI) had already lodged a first information report (FIR) against Ms Ramkrishna. 
Another team of the CBI searched the SEBI office in Mumbai and recovered some incriminating documents, evidence and digital documents.
“These are crucial documents and evidence nailing the lies of the accused involved in the case. We are in process of making a foolproof case against all the accused. These will help the prosecution in proving our case when it will go to court,” the source told IANS.
Earlier in the day, Ms Sitharaman chaired a post-Budget meeting with heads of banks, non-banking financial institutions (NBFCs) and financial institutions in Mumbai. Underscoring the importance of information sharing and collaboration, the FM exhorted all the banks to sign up to the account aggregator model to facilitate the seamless flow of credit for small borrowers and promote digital lending.

Ms Sitharamana also directed that pilots for account aggregator model and cash flow-based lending may be replicated in different regions around the country, including in the north-eastern region, on the lines of the initiative by two banks in Varanasi district.

She also emphasised that digital banking, digital payments and fintech innovations are an opportunity for banks to find new ways to reduce the cost of intermediation and provide cost-effective services, and the benefits of digital banking should reach every nook and corner of the country in a consumer-friendly manner.

She further stressed that the banking industry should target to open accounts of unbanked adults under Jan Dhan Yojana and ensure insurance or pension coverage to all eligible adults.

The finance minister also chaired the 25th meeting of the Financial Stability and Development Council (FSDC) in the city. The Council deliberated on the various mandates of the FSDC and significant macro-financial challenges arising given global and domestic developments.

The FSDC noted that the Union government and all regulators need to maintain a constant vigil on the financial conditions and functioning of critical financial institutions, especially considering that it could expose financial vulnerabilities in the medium and long term.

The Council also discussed measures required for further development of the financial sector and achieving inclusive economic growth with macroeconomic stability.

Coming back to the NSE issue, on 2 December 2016, Chitra Ramkrishna resigned as MD and CEO of the bourse. However, SEBI, in its 11th February order raised serious questions on how the NSE board allowed her to exit from the Exchange, despite the misconduct in appointing and sharing confidential information with an unknown person.
Anand Subramanian was asked to resign in October 2016 and the drama of his removal has been documented by Moneylife editors Sucheta Dalal and Debashis Basu in their book Absolute Power: Inside Story of the National Stock Exchange’s Amazing Success, Leading to Hubris, Regulatory Capture and Algo Scam, released in June 2021. SEBI had been sitting on this information since 2014 and has issued its order only now.
Read our coverage on NSE Algo Scam here
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