The Reserve Bank of India’s (RBI) exclusive debt trading club for banks, called the Negotiated Dealing System (NDS), kicked off trading last Friday with some teething troubles and technical glitches. What exactly is NDS? It is a bourse for the debt market especially gilts that is restricted to banks and institutions, and eliminates brokers. But the RBI would vehemently deny this description. If it acknowledges that the NDS is an exchange then a host of statutory complications arise. As the law stands today, the NDS would require government recognition under the Securities Contracts Regulation Act (SCRA), the powers for which are delegated to Sebi, the capital market watchdog. And the RBI would not seek Sebi recognition. Hence, the NDS denies that it is an exchange although its activities fits the statutory definition of a bourse. But Shakespeare would have said that—an exchange by another name is still an exchange—and the law of the land ought to apply.
But who will haul up the RBI? Sebi could, but it is already bickering with the central bank on this issue. The NSE could question it. After all, its debt market will be badly affected, but it doesn’t dare to. The debt market brokers could, since they are being eliminated, but they need a Brokers’ Forum type of body and an M.G. Damani type of leader to do so. Finally, the finance ministry could and should be asking questions, but if has, it is certainly keeping very quiet about it. Such is the clout of the central bank that when it chooses to do something, minor issues such as applicability of the law doesn’t apply and there are no questions asked.
The cleanest accounts
If one needed proof about how well the Institute of Chartered Accountants of India (ICAI) protects its own, its annual report is a good document. A newspaper report says that out of its 96,392 members, none was found guilty under the ICAI Council’s first schedule, while only one was found guilty under its second schedule. One more was found guilty under the first and second schedules. In comparison, says the newspaper, The Institute of Chartered Accountants in England and Wales, receives around 2,000 complaints each year about its members and firms. Today, when Arthur Andersen’s complicity in cooking up Enron’s books has shocked the world, ICAI too is feeling the heat. The self-regulatory body is being forced to change and has reacted by tightening some rules and putting a cap on fees earned by firms from non-audit work. Is this enough? The finance ministry thinks not. It has asked for external supervision of the ICAI to ensure that it is forced to get tough with its members. After all, we cannot have had so many vanishing companies and defaults with squeaky-clean accounts and auditors.
Phoren not the best
The next time you want to buy a made compact fluorescent lamps (CFLs), you had better think twice. A comparative test of 23 brands by the Consumer Education and Research Centre’s product-testing laboratory found that none of them gave the desired light and some did not even produce half the expected wattage. Actual wattage, when measured, was way below their claims and efficacy ratios were dismally below standards. The hype about low cost fluorescent lamps (they sell at Rs 35 to Rs 250 as compared to Rs 350 charged by Indian brands) led CERC to test only foreign makes. Also, many of the brands made claims about energy conservation and brightness, which were found to befake and misleading.
A report in CERC’s Insight magazine says that since the laws aimed at ensuring that these brands meet specifications are not enforced, they end up cheating consumers and short-changing Indian manufacturers.
A few weeks ago, the heads of Mumbai-based cellular service operators were moaning before the Telecom Regulatory Authority of India’s (TRAI) open house meeting that competition had depressed prices so much that they were offering their services below cost. Yet, every time mobile subscribers receive their monthly bill, they wonder if they are hooked on to a phone company or a departmental store or maybe even a travel agency. The bill is a bulky envelope in thick, glossy art paper with at least two or more expensive little four-colour booklets hawking a variety of discounts, services and privileges and whether or not they use any of them. The cost of printing and promotion is probably loaded on to the subscribers. Cell phone subscribers would like the TRAI to get phone companies to disclose what it costs to organise the frills and promotional tie-ups and how many subscribers actually avail of these discounts (usually at five star restaurants) and would they prefer lower bills to such gimmicks?