Sucheta Dalal :Who will head SEBI? (17 December 2001)
Sucheta Dalal

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Who will head SEBI? (17 December 2001)  

Around a week ago, a strategically timed news report said that the secret search committee set up to find a new SEBI chairman has drawn a blank. We now learn that this may be just what the government wants in order to justify yet another extension, albeit a short one, to D R Mehta. According to sources, Mehta turns 65 in June and there is hectic lobbying to allow him to continue until then. Those pushing for extension argue that it would only ensure continuity at SEBI as long as the Joint Parliamentary Committee (JPC) continues its hearings. If the second extension comes through, Mehta would have been in office for seven years against a three-year term that is prescribed under the SEBI Act. His first term of five years required some convenient interpretation of discretion granted under the rules. His two-year extension was cleared by the PMO even though Mehta had made an oral submission to the court (in a case challenging the term of his tenure) that he would not seek an extension. The third extension, if it happens, would indicate that the government is completely uninterested in going ahead with the much-needed reorganisation of the market regulator by inducting a younger and more dynamic chairman.

The counter push

While a strong group of supporters is plugging for Mehta’s extension, we learn that the Finance Ministry is not too keen. The Finance Minister’s preferred candidate, say sources, is his classmate and former chairman of State Bank of India, M S Varma. It may be recalled, that Varma was one of the two candidates suddenly eliminated from the race for the post of capital market watchdog, by offering them important assignments, which were far removed from their core skills. This had allowed government to claim that there were no suitable candidates for the top SEBI job and to give Mehta an extension. However, it must be remembered that the favoured candidates of finance ministers’ are not necessarily cleared by the PMO. It has happened in the past with regard to the SEBI post itself.

Gunning for the top

The Chief Vigilance Commissioner (CVC) has either got himself a new helper, or the public is losing faith in his promise of ‘zero corruption’. Last week, a rather bold advertisement in a pink paper by someone called ‘Patriot’ from Delhi ( patriot—[email protected]) called for information, specifically against senior public servants, including Ministers, in the Ministries of Finance and Coal & Mines. The advertisement sought ‘genuine information’ on people who are ‘plundering the nation and betraying the people.’ The advertisement also promised ‘prompt and strong action’ would be initiated to ‘nail the culprits’ and promised awards for informants. Is this merely vendetta from someone with deep pockets and vested interests, or does it indicate the deep rot in the system and public anger at the rampant corruption?

Fighting for accounts

The leading private sector banks are involved in an intensely aggressive fight to open new accounts. So intense is the battle that people are accosted at ATMs to ask for references or frequently hounded by telemarketing agents to sign up. Most banks have outsourced the sales function to agencies that are paid for every new account. The bank weeds out unsuitable candidates before actually opening the new account and paying the sales agency. These payments are fairly large and range from Rs 500 for a current account to Rs 250 for a savings account and Rs 15 for a student account. In one of the banks, insiders tell us that such lucrative payments have bred large-scale corruption through kick-backs to key bank officials. They allow un-remunerative accounts to be opened through poor scrutiny, waiving of the minimum balance or permitting it withdrawn soon after the account is opened. One aggressive bank allegedly has 10,000 zero balance accounts at a mid-Mumbai branch and 5000 zero balance accounts at another branch. The propensity to splurge extends to other areas of its operation as well. Hefty advertising budgets, and big overtime payments are part of the package. Obviously, how much a private bank spends on its operating expenses and publicity is outside the Reserve Bank’s supervisory purview, but investors would surely be concerned.

Tailpiece: The Enforcement Directorate’s raid on a prominent lawyer-cum-chartered accountant in South Mumbai, who specialises in setting up Overseas Corporate Bodies (OCBs) had surprised the legal community. After three days of searches, the Enforcement Directorate seized a pile of documents which detail the operations of two large brokers who are being investigated in connection with March 2001 scam. The Directorate is now under tremendous pressure to release documents seized from the lawyer and an official has been sent over from Delhi to do the job. Did the Enforcement goof up or the investigation being mothballed?

-- Sucheta Dalal