The finance ministry’s lethargy in filling long existing vacancies on the Sebi board is giving the capital market regulator a bad name. Sources say that Sebi has a long list of decisions that it needs the board to clear including changes in listing rules, options and futures and demutualisation of bourses. However, with no replacements found for Kumarmangalam Birla and J.R.Varma, even a single absentee causes the meeting to be cancelled for want of a quorum. Sebi has taken to fixing several board meetings in advance in the hope that at least some will materialise. Ironically enough, the union cabinet has recently enhanced the size of the Sebi board from six to nine. If the government cannot fill two vacancies for almost a year, when will it fill five?
Selling Ispat Industries.
The financial institutions approached Tata Steel to ask if it would take over Ispat Industries’ Dolvi plant, which has suffered huge cost overruns and delay in implementation. Tisco was reportedly interested but wanted to acquire it for a song. Later the Tata company was at pains to deny that it had approached financial institutions (it was the other way around). The publicity and the denials however seem to have had the desired impact. The Mittals of the Ispat group, who are notoriously reluctant to pay back their loans have stepped up their repayments. The lead institutions’ neat little trick has also sent three important signals to industry. First, that it is willing to get tough with defaulters and will actively seek buyers for their units. Secondly, that there are potential buyers even for large beleaguered steel project s (the price is a matter of negotiation). And thirdly, that industrialists manage to come up with funds for repaying banks and financial institutions when they are seriously pressured.
The Banthia saga
Did Charotar Cooperative Bank finally get Rajendra Banthia? Contrary to media reports that the stockbroker was arrested in connection with a failed Charotar bank transaction, Banthia continues to remains a free man. On the other hand, the Reserve Bank of India placed Nedungadi Bank (which he successfully ruined over the last decade) under moratorium last week. The bank shot to fame in 1992 when the late B. Ratnakar, former Canara Bank chairman cornered a large chunk of its equity. After his death, Rajendra Banthia, a crony of scamster Harshad Mehta acquired 40 per cent of the bank’s shareholding, with the central bank making no effort to prevent it. In the mid 1990s, when Banthia became Vice President of the Bombay Stock Exchange (BSE), he began to actively influence the bank’s business decisions. Two of his nominees, both BSE directors (former BSE President M.G.Damani and Suresh Vaidya), were appointed to the Nedungadi Bank board and it also became a clearing bank for the stock exchange. In 1998, Banthia was indicted by Sebi for colluding with Harshad Mehta to manipulate prices of BPL, Videocon and Sterlite and for negotiating a shameful cover up of a massive payment default at the bourse. Even that rang no bells at the RBI and no effort was made to investigate his holding.
During the Ketan Parekh scam, three of Banthia’s firms ran up transactions of Rs 1,350 crore on behalf of Nedungadi Bank and made huge losses in the process. But Banthia was only asked to step down from Nedungadi board in April 2001. The problems at the bank are a clear case of poor supervision and regulatory failure, but will the RBI ever be indicted for failing to do its job?
China’s gold designs
Since India is one of the world’s biggest consumers of gold, the unprecedented 40 per cent slump in demand was worrying the world gold market. But an unexpected surge in gold buying during Diwali had banks in Mumbai’s Jhaveri bazaar struggling to cope with extra large cash deposits from jewellery shops. But even as gold traders are keeping their fingers crossed and hoping that the buoyancy will continue, gold expert Madhusudan Daga warns of another threat. The Chinese, he says are seriously getting into traditional gold jewellery for the international market. And guess what, they are importing Indian and Bangladeshi craftsmen into China by the tens of thousands to produce the traditional, delicately filigreed Bengali jewellery. These karigars, who are usually exploited by sweat shops of Kolkata and Mumbai are apparently quite happy to go to China for some extra money. Language is also not a problem since they work in large groups. -- Sucheta Dalal