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

Like this story? Get our top stories by email.



Babubhai Vaghela

4 years ago

Why HDFC Bank want this lady Shyamala Gopinath as Chairperson?


7 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

7 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

7 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

7 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

7 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

7 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

7 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

7 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 7 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.


7 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!


7 years ago





7 years ago

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


7 years ago

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

R Balakrishnan

7 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 7 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.

IPO Crackdown-3: Tijaria Polypipes

Due to the sharp fall in price of the scrip on the listing day (from around Rs60 to Rs18.10), genuine investors who had purchased the shares on the first trading day have been left with no option, but, to continue holding the shares which have hardly any value and thus incurring huge losses

As part of the nationwide crackdown on Initial Public Offerings (IPO), the Securities Exchange Board of India (SEBI) has barred Tijaria Polypipes (TPL) as well as several individuals and stock brokers from accessing the securities market. As reported earlier, Hem Securities, the merchant banker to the issue, was spared from any wrongdoings. Incidentally, the merchant banker has had a history of violations in the past (see

On 27 September 2011, the company raised Rs60 crore to fund its proposed expansion and diversification plans at Rs60 per share. On 14 October 2011, the day of the listing, the stock trended much of the day between Rs40 and Rs60 before it collapsed to Rs18.10 towards the end of the day. SEBI received a complaint alleging insider trading and artificial volumes had caused huge losses to retail investors.

An investigation exposed a shocking tale of manipulation and deceit through the collusion with certain retail and qualified institutional buyers (QIBs). The three QIBs—Sparrow Asia Diversified Opportunities Fund, Credo India Thematic Fund (CREDO), and IPRO Funds were clearly allowed to exit the stock on listing day at a premium to the issue price. They exited at an average price of Rs62 per share, while the stock closed at Rs18.10 towards the end of the day.

The higher exit for QIBs was orchestrated through a set of brokers, namely—Grishma Securities Pvt Ltd (Grishma), Parklight Securities Ltd, Pinac Stock Brokers Pvt Ltd, and Volga International. These stock brokers used certain individuals as front-runners to buy the stock from QIBs and retail allottees who wanted to sell them. These individuals were neither original allottees nor subscribers to the IPO of TPL. A simple Google search will show that Parklight Securities has been habitually in trouble—it was banned for six months in 2003 was involved in the infamous Nissan Copper case and at least 15 other cases of manipulation. Each time, a generously indulgent SEBI allowed it to escape with a minor suspension, illegal administrative warning or a paltry settlement under its consent order scheme (see ). Doesn’t this warrant a full fledged investigation?

These stock broking entities were creating artificial volumes in the scrip by carrying out structured reversal of trades, thereby inducing the innocent investors to purchase the shares of the company on the first day of its listing.

One of the stock brokers, Grishma, had used one particular client, Jivraj Zala to trade heavily in the scrip of TPL on the listing day leading to a loss of over Rs9 crore, without collecting any margin from the person. How did Grishma fund Mr Zala? Grishma manipulated the client ledger of Mr Zala to give an impression that there were funds in his account, by using other clients’ funds. This is not all. There were several other brokers who were front-running select clients in this manner, as well.

Grishma abused the KYC process by allowing Mr Zala to rack up several crores of losses, Rs9.95 crore to be precise, and yet KYC records showed that he had only an annual income of less than Rs4 lakh.

TPL lied in its prospectus that it had not raised any “bridge loans” when it had actually raised as much as Rs12.5 crore through inter corporate deposits (ICDs). According to the company, the ICDs were used to meet “business needs for a project under consideration”.

The companies that were issued ICDs, namely Nihita Financial Services Pvt Ltd, Bellisima Impex, Balasaria Holdings, were involved in diverting the IPO proceeds of TPL to select individuals and entities. For instance, Bellisima Impex transferred money received from TPL towards ICDs repayment, to Jivraj Zala, the very same retail client who lost crores of rupees.

Moreover, when the company was asked to produce evidence of ICD agreement papers, it produced fabricated copies, which were done in a very shoddy and amateurish manner, thinking it could outwit SEBI. Why did Hem Securities, the merchant banker to the issue, not verify this material fact?

To cut a long story short, TPL had orchestrated a very convenient exit for QIBs and certain retail allottees by arranging certain stock brokers to have a counter-party ready in order to buy out the IPO allottees at high prices, before the price plunged from roughly Rs62 to around Rs18.10. Due to the sharp fall in price of the scrip, genuine investors who had purchased the shares on the first day of listing have been left with no option, but, to continue holding the shares which have hardly any value and thus incurring huge losses.

The entire modus operandi was conducted in similar fashion with other brokers and entities which can be described in the graph below:


As a directive, SEBI has ordered TPL to deposit roughly Rs45 crore in an escrow account until further orders. This means the investors will not be getting back their money soon


Like this story? Get our top stories by email.



Ajit Jacob

7 years ago

During the last 5 years approximately 120 IPOs and FPos were subscribed in India. Today out of that 98 are showing highly negative return to investors ranging from 5% to 90%
Premium chareged at IPOs are very much on the higher side and without any justifications .A new company before starting production or oits main operation ,how can they charge heavy premium in IPOs.I is because there is no regulator controlling IPOs and FPOs taking undeue advantage of the liberalisation unreasonable premiums are charged.A promoters are hand in glove with Merchant bankers ,big brokers and market manipulators and grey market operators work for making an IPOs fully subscribed by unfair means Then most of the clever get out on listing then the genenuine investors are the one who suffer heavy losses.There must be fair formula to decide the premium and the same should be under the control of the Regulators.SEBI and stock exchanges.Culptrits should be puunished and black listed. The regulatros should also see that the money raised by IPos or FPOs are utilized for the same purpose which has been mentined in Prospectus etc.


7 years ago

I am a senior citizen and with a very small pension income.I am stuckup with 1000 TPL shares at very high price.My only reason investing in this co is that Tijaria is a jain religious place and no jain will ever miss use the name.
But hugely cheated by a jain promoter.May Gold bless them.


7 years ago

During the last 5 years i.e from 2006 to 2011 there were 120 IPOS and FPOS Out of this 120 98 issues are giving negative returns and that too varying from 5% to 95% You can get upto date information from IPO tracker and verify yourself the exact position The SEBI,BSE,NSE,RBI ,Finance Ministry and Ministry of company/corporate affairs are not bothered about this They have not taken any action against errant promoters,Merchasnt Bankers and Issue Managers. They should call for explanation and verify how they have charged high premiums and how the money raised from these issues are used or misused.Those promoters and Merchant Bankers should be severly punished and recover the loot from the promoters and pay back to investors. Before starting operationor even before acquiring land and offices for set up of business they are charging high premiums.Some how due to underground operations among GREY MARKET OPERATORS, CIRCULAR TRADING AND ,CROOKED BROKERS AND INVESTMENT ADVBISORS THE ISSUES GET FULLY SUBSCRIBED AND SOME TIMES MANY FOLDS



In Reply to pcchacko 7 years ago

It's a fact that regulators fail in their duty,but finally it's our money we have to protect,so before blaming others,we have to introspect & do some basic research.If some one ask for money we try & verify the matter,even it is from relative or neighbour,or our regular servent,but we put money in stockmarket like depositing in temple,where questions should not be asked:),& after loosing try & blame everyone,except self.


In Reply to Hemant 7 years ago

Every investors are not financial experts does not understand the foul play done by promoters,Merchant bankers and QIBs BIG Brokers.People learn by experience that does not mean that the Regulators keep their fingers crosssed while large scale mafia is working withoutany fear of facing any consequences of their foul play.What I asm trying is to creat an awareness amont the genuine invetsors not to go for any IPO now unless they are quite sure about the safety.Only 10% corporate houses are honest The rest are trying to loot.


In Reply to pcchacko 7 years ago

We both are aiming for same but i state that we just can't blame authorities only(They will always act after the event is over),we have to blame us also for throughing our hard earned money & you don't need to be expert for doing basic research.Further if you notice letter from K.C Gupta,herein above,investment was made because Tijaria is jain religious place,now how can you make investment base on the companies name,that also by a person who is getting small pension income ?Any way we all pay price for getting experience,as nothing comes free.Period...


7 years ago

Stop calling the persons who got stuck,as genuine investors,as they doesn't belong to that catagory.

Goodbye, Mr Market

New guidelines for public shareholding of listed companies may offer convenient exit route for some companies wanting to avoid public scrutiny

Corporate laws and frameworks are generally supposed to protect consumers and the society, at large, from any wrong doings incurred by a company. However, the newly revised guidelines of public listed companies drafted by the ministry of finance may actually provide an exit route to some of the companies which would prefer to avoid scrutiny and ire of shareholders and general public.

According to the revised guidelines, “all private sector listed corporates must have at least 25% public holding while listed PSUs should maintain a minimum public holding of at least 10%.” The deadline for this compliance is June 2013, roughly 18 months from now. The threshold was 10% in 2001, before being raised to 25% in 2006. However, there were relaxations in the regulations allowing companies to have promoter holding of up to 90% in most cases. This is the first time that the 25% public share holding mandate (and 10% for PSUs) will be strictly enforced by government authorities. had recently come up with a report naming as many as 18 potential de-listing candidates which may not comply with the new revised guidelines issued by the ministry of finance in August 2010.  According to the report, some of these companies are “fundamentally strong multinational companies (MNC) [who] may not have the inclination to increase their public holding and may resort to delisting to have better flexibility in taking business decisions.”

Incidentally, some of the companies in the list had been covered by Moneylife in the past, namely: Oracle Financial Services (OFS), Kennametal India, Honeywell Automation, Fairfield Atlas and Gillette India.

Bigger companies like OFS, owned by US-based Oracle, have the resources to go private and it might opt for this route. According to the report, OFS might have to cough up as much as Rs3,986 crore for buying back its shares. Similarly, Novartis India, Honeywell Auto, Timken India, Thomas Cook and GMM Pfaudler have enough in their coffers to exit the market.

However, we learn from the report that there are some good companies which may not have the requisite funds to pay shareholders at time of delisting. For instance, 3M India, part of the well-known 3M and inventors of Post-It Notes, has only Rs267 crore on its balance sheet, whereas it would have to shell out Rs1,000 crore at time of delisting, assuming its market price is same as today. Similarly, local companies Blue Dart, AstraZeneca India, Swedish-based Alfa Laval India, Gillette India, Wendt India, Singer India and Kennametal India are examples of companies which, currently do not have the resources to exit and might have to borrow funds for this purpose. Further, Gillette India was cited as a ‘value destroyer’ in our 17 January 2008 issue of Moneylife.

We had covered Kennametal India in its reputed Street Beat section as part of the 26 January 2012 issue. The Moneylife team valued the company at Rs450, which is well below its current price of Rs789 (as on 13 January 2012). Hence, there’s a possibility investors will get a good deal in case the company decides to delist, if the price of the scrip doesn’t fall.

The report cites, “The chances of a delisting offer succeeding also appears higher due to a moderation in return expected by the public shareholders and the enhanced willingness to exit the stock even at a marginal premium to current stock prices.” Thus, some of the companies might want to take advantage of the new rules by exiting the markets, to focus on running their business, thus avoiding public scrutiny, endless compliance requirements and accountability.

The critical question to ask at time of delisting is whether a particular company offering a buyback is offering a “fair price” to the shareholders. According to the report, “The case for delisting becomes stronger in the current weak trend prevailing in the equity markets, which has led to a substantial fall in stock prices providing an opportunity for such corporates to buy out the remaining stake with the public at lower valuations.” This may not be good news for investors who have bought shares in these companies at higher valuations during the market peak. Companies which have delivered poor returns for shareholders will obviously want to exit the market, further depriving of shareholders of any chance of getting back their capital.

It is not very good news to some companies either, as some of them, especially good ones, would be under pressure to offer securities to comply with the new requirements without having any regard to market conditions, which may in turn impact valuations that might prove to be harmful to shareholders.

Either way, we find that the new regulations do not provide an ideal situation for shareholders. Good companies do not generally delist as they usually make an effort to comply with regulations. The new regulations are merely giving a window of opportunity to companies who prefer not to be accountable to the public at large, and ultimately its shareholders.

Like this story? Get our top stories by email.


We are listening!

Solve the equation and enter in the Captcha field.

To continue

Sign Up or Sign In


To continue

Sign Up or Sign In



online financial advisory
Pathbreakers 1 & Pathbreakers 2 contain deep insights, unknown facts and captivating events in the life of 51 top achievers, in their own words.
online financia advisory
The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Online Magazine
Fiercely independent and pro-consumer information on personal finance
financial magazines online
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
financial magazines in india
MAS: Complete Online Financial Advisory
(Includes Moneylife Online Magazine)