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JPC gives clean chit to RBI, NSE

Priya Ganapati in Bombay

Prakash Mani Tripathi, chairman of the 30-member Joint Parliamentary Committee set up to probe the recent stock market scam, has given the Reserve Bank of India and the National Stock Exchange a clean chit in a preliminary announcement on Wednesday evening.

The JPC led by Tripathi met the RBI Governor Dr Bimal Jalan, the two deputy governors, the executive director, the regional director and other senior RBI officials in the morning.

"Within the constraints of our system, the RBI has done a good job. But of course, more needs to be done. It is an on-going process," Tripathi said expressing satisfaction with the way the RBI is functioning.

The bulk of the JPC's discussions with the RBI, however, centered on the action taken by the RBI to strengthen the system and plug the loopholes after the 1992-Harshad Mehta scam.

"We had posed certain questions pertaining to the RBI's role in the market, the action taken by them after the 1992 scam and what requires to be done further," Tripathi said.

Of the 30-member team, 24 officials were in Bombay for two days to probe the role of RBI, the NSE, the BSE and the Securities and Exchange Board of India in the recent scam.

The JPC's efforts in Bombay have been directed towards examining the action taken post the 1992 scam.

"The aim of the JPC is that no matter how good the recommendations, the speed and efficiency of implementation will decide the efficacy of the committee," Tripathi said.

He clarified that the reason why the JPC was looking into the action taken report of the 1992 scam was to make sure that the present system has the safeguards implemented.

"It must be remembered that the 1992 scam was heavily bank-oriented and so we talked about the action taken report. We are only keen to find out the speed and the efficiency with which the recommendations then were implemented. This is the only way we can ensure that our recommendations don't just stay on paper," he said.

RBI officials have explained their position to the JPC and also presented it with a detailed account of the steps taken by the bank after the 1992 scam was unearthed.

Explaining RBI's position on the Madhavpura Mercantile Co-operative Bank case that was a part of the recent scam, Tripathi said, "The RBI has made it clear that in the Madhavpura Bank case greed got the better of the regulations. The rules are there in place but they were circumvented by the guilty."

Later in the afternoon, Tripathi and his team visited the NSE building to inspect its systems and software. The JPC was given a technical briefing on the functioning of the NSE and its surveillance systems.

"Unlike the Calcutta Stock Exchange, we found a great deal of transparency at the NSE. Real time information is clearly available. And we do not think that there has been any systemic failure or irregularities there. However, the fund clearing and settlement system is what needs improvement," he said.

The JPC also met four broker representatives of the NSE for their views.

While the committee has been given till the end of the monsoon session to place its report before the Parliament, Tripathi said that he could not promise delivery on schedule.

"This is a dynamic situation. New views keep coming to light every day. So, I am not in a position to tell now about when we will complete the report. We will try to give it on time but whether we can will become apparent only in two weeks," he said.

Protesting against any suggestions that political interference could have played a role in the recent scam, Tripathi asserted, "We have no facts to support this view. I believe that this is just a theory held by many, which does not have any supporting evidence. The JPC will not go by views. It will definitely consider this view point but only if there is any evidence to go with it."

He clarified that the JPC, so far, has not come across any evidence of political interference or political hand in the recent scam.

"There is no evidence to suggest interference by politicians and I believe that the JPC will not go by just viewpoints on this issue," he said, sidestepping pointed queries about the role of a few prominent politicians in the recent scam.

On Thursday, the JPC team will go to the Bombay Stock Exchange in the morning and later on summon Sebi officials for a hearing. The Sebi officials are again expected to be quizzed on the action taken after the 1992 scam to plug the system loopholes.

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