If there is one thing that caused as much nervous talk as the crazy, zig-zag gyrations of stock prices last week, it is a report that mega trader Rakesh Jhunjhunwala broke a fancy plasma television at his office in a fit of anger. Now, Jhunjhunwala has been a vocal bull who has openly bet on the Sensex going up to 25,000. His massive trading portfolio and ability to move stock prices is part of market lore, so when the Sensex crashed from above 12,000 to just below 9,000 there was a lot of curiosity about Jhunjhunwala’s trades. Story goes that Jhunjhunwala shattered the television in a fit of rage over repeated questions about his physical (not financial) health. Two days later, the Bull operator satisfied public curiosity by turning up at the Myiris.com Money Show last weekend to say that India’s ‘‘structural and secular Bull market was alive and kicking’’. Last week’s price trend showed that it could kick both up or down.
On June 12, the Securities Appellate Tribunal (SAT) recently stayed the Securities and Exchange Board of India (Sebi) order asking the National Securities Depository Ltd (NSDL) to revamp its management. It expressed the prima facie view that Sebi had no power to issue directions to the promoters of a company to revamp its management. Barely a day later, NSDL held an Extraordinary General Meeting at which the CMD was given another 3-year term with an upward revision in salary. According to an NSDL director, the decision was cleared sometime in March. Is this what SAT had in mind when it questioned Sebi’s powers? The development raises several questions. For instance, is there a need to define Sebi’s power and responsibility over depositories? After all, depositories are the only market intermediary which operate under a separate statute and yet, curiously enough, are under the regulatory ambit of the capital market regulator. Further, depositories are owned by a bunch of banks and institutions (from the public and private sector) that do not interfere in the management of these unlisted, professionally managed, quasi-public sector companies. This can only work if the Finance Ministry, which cleared a separate statute for depositories, is made directly responsible for their supervision—but that again will be divisive and undermine the capital market regulator. Clearly, some brain storming is in order.
Last week we wrote about how the Reserve Bank of India’s (RBI) intervention had ensured that Deepak Banerjee got the free tickets promised by Citibank’s Fly-For-Sure scheme. We then wrote that although RBI’s intervention is welcome, it will take a lot more to ensure that banks don’t leave customers at the mercy of third-party vendors after luring them to spend more money. We are happy to report that the RBI, probably for the first time, is indeed taking up the issue on a class-action basis. Citibank’s top brass was summoned by the RBI last week and told that it will verify the list of all customers who qualified under the scheme and ensure that everyone has got the promised free ticket (on spending Rs 30,000 in a specified period). Citibank sure has its work cut out; a quick Google search throws up scores of complaints and shows the enormous anger generated among its customers. It is a sad commentary on its service standards that RBI had to goad it into fulfilling its responsibility.
While bashing up banks for bad service, it is important that we also mention the innumerable attempts by customers to dupe banks and probably ruin the careers of some trusting bankers. The biggest complaint among public sector bankers these days is trickery by customers and submission of fake and fudged documents to obtain a housing loan or avoid paying credit card dues. A leading public sector bank executive tells a story of how a top Bollywood actor-turned-television host with an amiable image, deliberately signed his name with a wrong spelling and then tried to deny he had issued the cheque. A hand-writing expert was brought in to establish it was indeed his signature. Even then the bank got him to acknowledge his mischief after a 3-month chase and vigil outside his residence. Another highly-reputed actor who plays gangster and crusader equally well almost got his banker into serious trouble by issuing a cheque signed in English although he usually signs in Marathi. In a giddy effort to please the celebrity star, the bank was all set to clear the cheque when a senior manager noticed the English signature. A few days later, the star coolly admitted that he put a wrong signature because he did not want the cheque honoured. Had the banker acted in good faith, the star may well have lodged a complaint and demanded restitution. If celebrities are a problem, politically connected persons, lawyers and even journalists are another ‘avoidable’ category for most banks.