Alan Greenspan, the powerful chairman of the US Federal Reserve has responded publicly to President Clinton's social security reform measures by warning against investing a quarter of the money in stock markets for higher returns. He says, ``I do not believe it is feasible to insulate such huge funds from government direction''. If the high level of political accountability in the US still makes the Fed chief wary, how much worse will it be in India where Provident Fund (PF) money is proposed to be invested in stocks. Hopefully, our babus who are influenced by industrialists' lobbying for a piece of the Rs 2,00,000 crore PF corpus, will take note of the Fed chief's comments which are ten times more applicable to India.

Kudos governor Jalan

Not known to be too receptive to ideas from outside in the past, things have changed at the RBI under Governor Jalan. A year ago, documents given to the RBI showed a private banks' inspection reports had been steadily diluted -- itsdubious lending to an Ahmedabad real estate developer was also documented. Just when it seemed the RBI would do nothing, one finds that the bank has been forced to make provisions of Rs 28 crore for sticky loans which it has done `under protest'. It has also sacked five persons in Ahmedabad and is cleaning up other issues. Clearly, Jalan's changes go far beyond making the RBI more accessible to the media.

Now go for dematerialisation

The RBI has already asked banks to dematerialise stock of those companies in SEBI's compulsory demat list which are pledged with them. In the interest of cleaning up the capital market and flushing out bad paper, it should be mandatory for banks to lend only against demat shares. This would clear up market rumors that fake, stolen or duplicate shares or bad paper with signature mismatches are often dumped with banks to raise funds. There is no need at all for banks to hold dangerous physical stock when they could easily create business for themselves in their role ofdepository participants by demanding dematerialisation.

More on the UTI clean up

Broker circles are agog with gossip about the resignation of a leading foreign fund manager being linked to the change in portfolios at UTI. Apparently, the fund manager, some heavyweights at the Indian trust and a few big brokers worked with an alchemists' zeal on the shared goal of turning inside information into gold. There are reports about the quantum of business routed through one firm, on how reports on UTI's problems were leaked through UTI-broker-fund manager cartel. There is also talk about money going into Mauritius based accounts. However, since the change in portfolios is so widespread, UTI for one seems determined that no muck sticks to its officials and the whole business is quietly buried.

Tailpiece

There is a tussle brewing between the BSE officers union and broker directors. The officials are upset about the exchange getting a bad name as their inspections and disciplinary actions aresuppressed by broker-directors. After the clearing house mess was revealed, they also came up with the fact that Videocon topped the BSE's list of companies with high investor complaints. The information that the company is not paying interest on its debentures was curiously buried.

The author's e-mail address is: suchetadalal@yahoo.com