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June 9, 2001
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Money > Business Headlines > Report June 9, 2001 |
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JPC to take finance ministry, RBI to taskP Vaidyanathan Iyer Taking umbrage over non-implementation of the 1992 joint parliamentary committee's action taken report recommendations, the current JPC on the stock scam will take to task the ministry of finance and the Reserve Bank of India in its next sitting on June 12. The committee called the RBI and finance ministry officials on Tuesday to explain why a scam similar to the 1992 one broke out a decade later despite the earlier JPC explicitly revealing the systemic gaps and failure of the RBI's supervisory mechanism in ensuring effective compliance by banks. The Securities and Exchange Board of India which was just getting into place then, in 1992, however, would not be grilled by the JPC as far as the implementation of the last ATR's recommendations were concerned. However, Sebi's laxity in monitoring the secondary markets during the current stock scam would be probed in detail. Issues like frequency of inspection of stock exchanges by the regulator and the effectiveness of such inspections would be looked at. Making presidents and executive directors of stock exchanges administrable, which was an issue then, has again cropped up. Expecting a flak from the JPC, the finance ministry is looking at the issue of custodianship of banks like Bank of Karad and Metropolitan Co-operative Bank, which went into liquidation after the 1992 scam. The finance secretary has already held a series of meetings with the banking division on the issue. Another major recommendation of the last ATR was to bring the Unit Trust of India under the purview of Sebi by amending the UTI Act. The government had subsequently asked Sebi to work out an appropriate regulatory framework taking into account the special characteristics of UTI for the purpose. The current JPC would also seek clarifications from Sebi and the finance ministry on this issue. The current JPC headed by BJP member of Parliament SPM Tripathi is also seriously working on issues which can ensure that the recommendations of the committee are implemented. The 1992 JPC, which probed into the irregularities in securities and banking transactions had come down heavily on the banking system. The ATR had revealed that the banks entered into a large number of ready-forward/buy-back transactions and indulged in irregularities like misuse of bankers' receipts, bankers' cheques and subsidiary general ledger accounts in blatant violation of RBI guidelines. The non-banking subsidiaries of nationalised banks including SBI Caps, Andhra Bank Financial Services and Canbank Financial Services had invested funds in the secondary market under the portfolio management services scheme and in unauthorised investment on stock exchanges through brokers. For example, ABFS had used Rs 3.50-billion worth deposits of public sector undertakings for security transactions. While the government did accept a failure in the supervisory mechanism of the RBI in 1992 and took steps to correct the same, the current stock scam immediately after the Budget had once again exposed the weaknesses in the system and the RBI's internal controls. Powered by YOU MAY ALSO WANT TO READ:
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