Until now Finance Minister Yashwant Sinha had steered clear of the sort of statements that continue to haunt his illustrious predecessors. After the 1992 Scam Dr Manmohan Singh had said that he could not be expected to lose sleep every time stock prices moved up or down. After a lacklustre budget, P Chidambaram had said that he was more interested in the reaction of Khan Market than the stock market. Recently Yashwant Sinha reportedly told a television channel, that he did not know about the manipulation of K-10 stocks because ‘it was not brought to my notice’. Is the finance minister sleeping at his job? He had similarly pleaded ignorance about the UTI debacle too. Maybe someone should suggest that Sinha read the newspapers, or consult fund managers in his family. Otherwise the finance ministry will lose what little credibility it still has.
Calling former eds
The Joint Parliamentary Committee’s decision to call former executive directors (ED) of the Securities and Exchange Board of India (Sebi) may turn acutely embarrassing for the regulator. Nearly seven years ago, a Calcutta Stock Exchange inspection report had unearthed rampant violation of rules and had recommended de-recognition of the exchange until it cleaned up its act. The ED had further suggested that the CSE should only be granted annual recognition in order for Sebi to keep a tab on it. Later, the same ED had recommended that the Ahmedabad and Patna stock exchanges should be similarly de-recognised and disciplined. Nothing ever happened. Similarly in 1994-95 the regulator had tracked the rampant short selling by rolling over trades across different settlement cycles of various bourses. Though Mumbai, Pune, Ahmedabad and Kolkata brokers were involved, only the Pune Stock Exchange board of superseded. The reports show that the very same brokers have been involved in price manipulations in 1999-2000—especially at Kolkata. How will Sebi explain its long inaction?
Incidentally, Sebi officials themselves say that there is a simple way of reducing the number of stock exchanges in India. We have 23 bourses, which is more than one exchange for every million investors. The irony is that no other class of people is at the same time so privileged and yet unprotected as Indian investors. That is because these bourses do not serve the investors but the coterie of brokers that run them. Most of them are badly in the red and have no future whatsoever. Since Sebi is so uncomfortable about asking the bourses to shut down, these officials it could probably do the next best thing and tighten the recognition criteria—especially in terms of capital and trade guarantee requirement. Those that fail to meet it will have no option but to shut shop.
Look at auditors
A spate of disclosures by listed companies is beginning to unnerve investors. First there was the case of DSQ Software, which showed that lower depreciation had inflated its profits (the company claimed it was an arithmetical error), then Vikas WSP’s auditors walked away after differences over presentation of accounts. The Tata Finance subsidiary, Nishkalp revealed large-scale fudging after the company was in serious trouble. Fairly reputed companies such as Tata Power and BHEL disclosed a change in accounting policy only in the notes to their 2001 accounts. This resulted in profit before tax being 15 per cent higher for Tata Power and 30 per cent for BHEL. A sure signal that the Department of Company Affairs needs auditors’ responsibilities and disclosures.
Suraksha capers continue
Here is the latest on Citibank’s Suraksha. As we said last week, the complaints continue to pour in—and Citibank seems worried at last. Here is what it wrote to cardholder B Shankaranarayan after offering an apology for having irritated him: ‘Irrespective of the facts, we fully recognise that you are extremely disturbed by the way this experience has turned out and this is not something we want our customers to feel. We are hopeful that our services, going forward, will not only reflect our endeavour to provide nothing but the very best in service, but will also reinstall your confidence in our relationship’. Citibank’s choice of words indicate a realisation that its customer relationship could be seriously damaged, but not entirely. It argues that: ‘Our previous experience and feedback from our card members show that they would not like to be disturbed for their confirmation regarding any additional benefit offered to them’. Sure, but this is not a free benefit. The very fact that there are so many angry customers proves the point that a paid service needs specific affirmation and acceptance. Notwithstanding the courteous letters, Citibank has no plans to issue a universal clarification to cardholders or to charge customers only on specific acceptance. All it is doing is apologising.