The Public Accounts Committee of Parliament says SEBI acted hastily in awarding the contract to NSDL that led to wasteful expenditure of about Rs12 crore
The Public Accounts Committee (PAC) of Parliament has criticised market regulator Securities and Exchange Board of India (SEBI) for wasting money on instituting and later abandoning its much-touted 'market participant identification number' (MAPIN) scheme.
The PAC has in a report said that SEBI acted hastily in awarding the contract for MAPIN database to the National Securities Depository Ltd (NSDL), which ultimately led to wasteful expenditure of Rs11.54 crore, as MAPIN was eventually suspended.
In July 2009, the Comptroller and Auditor General of India (CAG) had also deplored SEBI for awarding the database preparation work related to MAPIN to NSDL which resulted in 'unfruitful expenditure' of Rs11.54 crore of investors' money.
SEBI's former chairman CB Bhave was heading NSDL when the market regulator launched MAPIN. He was a big supporter of MAPIN and NSDL would have been a big beneficiary of the identification programme.
Earlier, in June-July 2005, after a six-member committee, appointed to re-examine the use, structure and feasibility of the MAPIN database-bowing to popular opinion-recommended an end to biometric identification for investors. Mr Bhave was one of the members who left the committee before it could draft and submit a report.
MAPIN registered fingerprints along with a photograph. Many retail investors believed that the use of fingerprints and photographs (used worldwide for identification of criminals) would be a punishment for honest investors, as no trickster would be so stupid as to undertake fraudulent transactions on his own ID. The other factor was that actual trading, at the time, did not involve biometrics and there was no way of verifying the fingerprints and photograph of an investor.
Besides, there were other avenues like depository accounts, brokers, permanent account numbers (PAN) and bank account numbers, available to regulators to track an investor and his investments.
In the first round of MAPIN, the stock market regulator issued about 4,00,000 UIDs, mostly to senior officials of various companies, institutions and brokerages, at a charge of Rs300 per ID.
The PAC, working under the chairmanship of Murli Manohar Joshi, submitted its report titled "Unfruitful Expenditure of Investors Money (SEBI)" to Parliament, which specifically mentions that the contract for MAPIN was awarded to NSDL without any competitive bidding.
Noting the concern about the infrastructure and data still lying idle with NSDL, the Parliament committee told SEBI to secure both the infrastructure and data without any further delay and keep it in safe custody so as to avoid its misuse.
The PAC said, SEBI should explore alternate schemes by completing all technicalities, including seeking public opinion through the media. It should be a priority for SEBI, as this can safeguard the interests of investors and provide credibility to the market regulator as well, the PAC added.
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