GV Ramakrishna, second chairman of the Securities & Exchange Board of India (1990-1993), and by far the most effective one so far, passed away in Chennai this morning. He was 91.
GVR, as he was popularly called, has had an illustrious career in the Indian Administrative Service (IAS) that ran for as long as 50 years. He became the Chief Secretary of Andhra Pradesh in 1983, and then worked with the union government in the ministries of finance, industry, steel, coal and petroleum. Early in his career he went to Harvard University for his Masters in Public Administration. He retired from the IAS in 1988 but his expertise continued to be sought by the government.
He was appointed India’s Ambassador to the European Union in 1989. The fact that he was making waves in Brussels apparently did not go down well with some powerful bureaucrats in Delhi. So, he was sent to Mumbai as SEBI chairamn, to what was considered a dead-end posting outside his area of competence. SEBI did not have statutory powers at that time.
When Ramakrishna, a sharp, upright and no-nonsense bureaucrat, took charge of SEBI, brokers controlled the stock exchanges; there was no sanctity to settlements; defaults were frequent; and investors were hapless victims with no recourse.
Even though SEBI was powerless on paper, GVR created a storm in the stockmarkets by talking of investor protection, disclosure, transparency and accountability of all the market players. He started by asking various market intermediaries to register themselves with SEBI. This immediately caused deep anger and resentment among brokers. At that time, the broker controlled Bombay Stock Exchange was the largest exchange and extremely powerful, because of the political connections of brokers. GVR had no hesitation in taking on the power structure at the BSE. And yet, he openly met a wide spectrum of people connected with markets and listened to them.
His table used to be stacked with copies of the laws and rules governing the capital market – the Securities Contracts Regulation Act, the BSE bye-laws, the listing agreement of stock exchanges and more. Pretty soon, he was rattling the BSE administration by asking pointed questions about the implementation of their own rules. He forced listed companies to pay attention to SEBI through the simple and effective strategy of ‘name and shame’, by releasing the list of companies with the highest investor complaints every fortnight. Pretty soon, companies worked at getting their names off the list.
Old timers still remember his Assocham speech, where he laid out his agenda for change by listing all that was wrong with the capital market. This included, inadequate disclosure and transparency, poor investor protection, a secular imbalance building up between supply and demand, outdated rules and procedures at stock exchanges, poor quality prospectuses and the complicity of merchant bankers in keeping investors ill-informed. He outlined steps needed to fix the problem and to improve investor protection.
He caused an upheaval and made headlines when he banned badla (BSE’s carry forward system), which was prone to speculative excesses, was poorly supervised and often led to broker failures.
In effect, GVR took on every segment of the capital market -- capital-raising companies, mutual funds, brokers, merchant bankers, underwriters, registrars and stock exchange boards. Consequently, each segment wanted him out. Even UTI had refused to come under SEBI regulation at that time, arguing that it was a unique Indian financial institution. At one time, GVR stopped many mutual funds from launching new schemes till they created appropriate structures: asset management companies, trustees, custodians and arms-length relationship with the sponsors.
In just two years, GVR had laid the foundation for a modern regulatory framework that covers the core of the market today – stockbrokers, mutual funds, investment bankers, insider trading etc. This led to intense lobbying by power brokers and stockbrokers to get him out.
Here is a story, probably apocryphal, which we heard at that time. Sometime in the second quarter of 1993, a Union Cabinet minister is supposed to have met Prime Minister P.V. Narasimha Rao in New Delhi with an unusual one-point agenda. With him were some top businessmen. These gentlemen, the minister told the Prime Minister, had traditionally been supporters of the Congress (I) and they could be of help to the party in the state elections, which were around the corner. But they were sore because the SEBI chairman was making life difficult for them with unnecessary rules and an unreasonably tough attitude. Could the Prime Minister help, asked the Cabinet minister? "But I am told that the SEBI chief is not tough enough," the Prime Minister is believed to have replied. "Can you suggest someone who is tougher? I will consider installing him." Both the businessmen and the minister were out of the Prime Minister's office in a matter of minutes. This story illustrates the implicit support GVR initially had from the Prime Minister Rao and finance minister Manmohan Singh. So, he survived for three long years, and seemed to get stronger with each crisis.
When the Harshad Mehta scam broke, one of Narasimha Rao’s son was found to be involved. In April 1992, scamster Hiten P Dalal had withrawn Rs two crore from his account at Andhra Bank and paid the money to a company called Goldstar Steels, through Andhra Bank Financial Services. The money was meant to shore up subscriptions to its rights issue, which was floundering and scheduled to close on 11 May 1992. Narasimha Rao’s son PV Prabhakara Rao was closely connected with Goldstar and it was clear that Hiten’s generosity was influenced by that connection. SEBI was asked to conduct an inquiry, which corroborated the irregularities that were alleged. In December 1993 when SEBI banned badla, the brokers shut down market. At the end of December, GVR was removed by making him a member of the Planning Commission, probably because he refused to water down the Goldstar report.
By the time GVR left SEBI, he had used his deadly combination of brilliance, strategy and scrupulous honesty to challenge and change every entrenched capital market lobby. He had brought mutual funds, brokers, sub-brokers and stock exchanges under regulation, introduced Application Supported by Blocked Amount (ASBA) for public issues, introduced the idea of Self-regulatory organistions (SRO) under which the Association of Mutual Funds of India (AMFI) was set up.
After a stint in the planning commission he was appointed chairman of the Disinvestment Commission for a three-year term that ended in 1999. Some of his observations about the ideal disinvestment process that ought to be followed are relevant even today.
His final assignment with the government was as the chairman of the Construction Industry Development Council (set up jointly by the Planning Commission and the Construction Industry to achieve excellence in all areas of the construction activity), which ended in June 2003.
Although GVR is known today for his pioneering role in transforming the capital market, it was his run in with Prime Minister Rajeev Gandhi over the Rs 1700 crore Hazira-Bijaipur-Jagdishpur pipeline project that first made him famous for his integrity and steely determination. He has recounted the episode in detail in his memoir titled -- Two score and Ten My Experiences in Government
. It provides an inside account of the clout of an Italian national called Ottavio Quattrochi and the power that he wielded through his connection with Rajiv Gandhi’s family. Quattrochi was also a key suspect in the Bofors gun scandal that marred Rajiv Gandhi’s tenure as prime minister.
In 1985, GVR, as union Petroleum Secretary was shepherding the HBJ pipeline project, which was to carry natural gas for ONGC across 1,00 kilometers from the fields of South Bassein. Although the Spie Capag-led consortium won the pipeline bid in an open tender, the Rajiv coterie subjected the bidding process to scrutiny by several committees, all the time trying to find ways to hand over the contract to Snam Progetti, which Quottrochi represented.
GVR braved the wrath of the prime minister and refused to bow to pressure and ensured a clean bidding process with legal opinions to back all his actions and absolutely no slip up. In fact, petroleum minister, Naval Kishore Sharma paid the price and was shunted out. But there is a twist in the tale. After the deal was done, the Spie Capag representative met GVR to offer him a 5% kickback -- a massive Rs34 crore for making the deal happen. A stunned GVR called in his Financial Advisor and director and asked the representative to repeat the offer before them. He then forced Spie Capag to offer a further Rs34 crore discount on the project cost “as a gesture of goodwill”, without informing the minister about the reason for this generosity.
GVR documents how the PM called eight meetings to review the implementation of the HBJ pipeline project, often cancelling them at the last minute. Quottrochi’s constant attempts to thwart the project continued, and by the time the Bijapur fertiliser plant was ready, GVR was so fed up of the project that he did not attend the inauguration. Despite the unsavoury HBJ episode, GVR’s personal experience of Rajiv Gandhi had a poignant ending. In May 1991 Rajiv Gandhi sent for him and asked if his assistance would be available to him after the general elections. He told his secretary Vincent George to give GVR priority on appointments and his direct personal number. A few days later, Rajiv Gandhi had been assassinated and was no more.
GVR was unafraid of powerful politicians or about being shunted from one position to another. His book recounts the long list of run-ins he had with politicians -- Dr Charanjit Chanana, an acolyte of Sanjay Gandhi, the energy minister, Shiv Shankar (who wanted a say in the way the coal companies placed their equipment orders) and the Andhra Pradesh chief minister, NT Rama Rao, who was upset that Ramakrishna settled a mining strike without waiting for Rao to return to the state and gain political mileage from it. But though he spoke his mind (Enron deal, the power policy, and the Oman gas pipeline project for example), he was not pigheaded. He got his work done through the system with intelligence, integrity and ingenuity and was always open to feedback from every stakeholder. It was an extraordinary life dedicated to public service.