October 09, 2000

SEBI and rolling settlements
Six weeks ago, SEBI was emphatic that stock exchanges would commence rolling settlements in November even if it meant that improved efficiency would hit trading volumes. Naturally, brokers were unhappy with SEBI’s decision, but they remained silent. At that time a broker said, “Nothing will happen. When the time for implementation approaches, there will be a postponement until the end of the fiscal. Those days, SEBI was pushing for rolling settlements so aggressively that it was impossible to believe that brokers would have their way. That is, until last Wednesday. Suddenly, coinciding with a risk management committee meeting at SEBI, the market was rife with rumours about the postponement of it. The meeting itself did not discuss postponement. On Friday, one paper said that the SEBI chairman indicated that rolling settlements would have to be postponed because the markets were not ready, the next day another paper contradicted this. The confusion continues, but the next three weeks should show how much brokers continue to influence regulatory decisions.

Paying for investors
It is an interesting contrast. On the one hand, Maharashtra government has threatened to revoke the license of power utility BSES, if it fails to pay standby charges of Rs 180 crore to the Tata Electric Companies. On the other, BSES is setting a record of sorts in investor friendliness. It is among the first companies to furnish particulars of unclaimed dividends in it as latest annual report. The government plans to transfer this money to an Investor Protection Fund set up last year. Investor groups have been demanding that the Department of Company Affairs ought to make it mandatory for companies to disclose unclaimed dividend amounts. BSES decided to do it. Its chairman R V Shahi, says that reporting unclaimed deposit amounts in annual reports is mandatory although the sums involved are far smaller than unclaimed dividends. In case of BSES nearly Rs 25.4 lakh worth of dividends have remained unclaimed in 1998-99 and the figure for the previous four years was, Rs 32 lakh, Rs 18 lakh and Rs 30 lakh respectively. The idea is that instead of transferring these sums to the General Revenue Account of the Centre, it can be used in efforts to protect investors.

Cultivating netas and babus
At the big conclave of Marwari industrialists at Rajastan recently, one industrialist made news when he said that when he had set up plants elsewhere in the world he never had to meet the Prime Ministers and Presidents of those countries. Interestingly, at my first meeting with the same industrialists’ India based brother (they have since split into two separate groups), he described at length their close friendship with the Prime Ministers and Presidents of each of the countries in which they had operations. Even the then Indian Prime Minister, I was told, used to visit them quietly, but maintained a distance in public. More curious is the fact the industrialist who complained about the system spends a lot of his time hobnobbing with politicians and bureaucrats, although he is a NRI and has little business in the country. Clearly it pays to cultivate heads of State and their babus everywhere, notwithstanding the complaints.

Worrying signals
The saga of bad loans, cost overruns, interest waivers and loan recalls discussed at ever inter-institutional meetings of the financial institution paints a scary picture of the financial health of corporate India. Adding to their woes has been the pressure to lend to the North Eastern states which are wracked by terrorism and industrial backwardness. Lending to companies in the region was usually backed by state government guarantees. However, now that its time to invoke the guarantees the states are unable to pay. They want the financial institutions to bear half the liability arising out of the invocation of guarantees. So far the FIs have refused. Is it any wonder then that the North East Development Finance Corporation, famously announced by former finance minister Manmohan Singh a few years ago has simply refused to take off?

Updated weekly.

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

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