[aaykarbhavan] Business standard news updates 20-3-2014

Poll panel raises red flag on bank licence timing

After getting RBI proposal for two licences, EC to seek clarity; decision likely by month- end SAHIL MAKKAR New Delhi, 19 March The Election Commission ( EC) has expressed its reservations on the timing of the Reserve Bank of India's ( RBI) proposal to grant new banking licences to two of the 25 applicants. "There are certain issues for which we need more clarity and are writing to the RBI," an EC official said on the condition of anonymity, adding the poll panel would take a decision by the end of this month. EC received the RBI proposal in the first week of this month, soon after the model code of conduct came into force on March 5. " The RBI had asked for our permission to clear two banking licences. The reason it cited was that the government had already announced giving new bank licences before the elections were notified. The central bank also said the relevant banking rules were notified way in advance," said another high- ranking EC official. The official didn't want to be named because of the sensitivity of the matter. The official said if everything was planned and announced in advance, there was no reason why the licences could not have been allotted earlier. " Why did the RBI have to wait for the electioneering process to begin? We are also considering whether this can wait for another two months, by when the election results would be out," he added. Another area of concern is whether the allotment of bank licences at this stage would give an undue electoral benefit to the Congress- led United Progressive Alliance (UPA) government in the elections. " RBI is an independent body and should not be seen as taking sides," the official said. The final decision will be taken by the three- member Election Commission, headed by Chief Election Commissioner VS Sampath. The other two commissioners are H S Brahma and Nasim Zaidi. RBI Governor Raghuram Rajan had said at a media conference earlier this month that he would certainly want the EC to be okay with issuance of licences at this stage, though the process had taken place over the past year. Rajan had also said the RBI would be able to issue banking licences in the next few weeks of getting the go- ahead. An expert committee under former RBI governor Bimal Jalan had given its final recommendations to the central bank after scrutinising all the 25 applications. The names of IDFC, a prominent nonbanking financial company and a microfinance institution have been doing the rounds as favourites to get the licences, though this could not be verified. RBI is reported to be playing safe this time and might not give licences to industrial houses, against what was the government's intention at the time of announcing more bank licences would be issued. The previous time the RBI issued banking licences was in 2003- 04, when it gave permits to two players. The stated objective of giving licences this time is financial inclusion, while in the past two rounds the RBI had wanted introduction of greater competition in the banking sector, then dominated by government- owned banks. UPA govt, which had

 

FTIL not ' fit & proper' to own bourse: Sebi BS REPORTERS Mumbai, 19 March The Securities and Exchange Board of India (Sebi) has barred Jignesh Shah- promoted Financial Technologies India Ltd ( FTIL) from owning stakes in the country's stock exchanges. In an order released late Wednesday evening, the capital markets regulator said FTIL was not ' fit &proper' to hold shares in bourses and directed it to sell its holding in the four exchanges and a clearing corporation within 90 days. A spokesperson for FTIL said that the company was still examining the order. Besides MCX- SX, FTIL owns stakes in the Delhi Stock Exchange, the Vadodara Stock Exchange, the National Stock Exchange and MCX- SX Clearing Corporation. Sebi's decision follows a similar move by the Forward Markets Commission, the commodity markets regulator. "A person who is not ' fit & proper' to hold shares in a commodity futures exchange cannot be ' fit & proper' to hold shares in recognised stock exchanges and clearing corporations. He poses the same danger to the interest of securities market as he does to the commodity futures market, as both require the same standard of integrity. So, there is no doubt that the declaration of FTIL as not ' fit & proper' by FMC has direct bearing on the securities market," said the Sebi order. There will also be an immediate freeze on FTIL's voting rights in these entities. The stock market regulator had sent a notice to FTIL in December, after FMC sent a similar one in the wake of a ₹ 5,600- crore payment crisis at National Spot Exchange Ltd, in which FTIL held a 99 per cent stake. Turn to Page 21 > UNFIT & IMPROPER |Dec 17, ' 13: FMC passes order against FTIL, declares it not ' fit & proper' |Dec 20, ' 13: Sebi serves 'fit & proper' showcause notice on FTIL for its holdings in MCX- SX and 4 other market infra institutions ( MIIs) |Dec 21 & 26, ' 13and Feb 10, ' 14: FTIL files its replies to Sebi |Jan 7 & 13, Feb 11 and Mar 6: FTIL appears before Sebi for personal hearing |Mar 6: FTIL counsel seeks time till March 18 to file written submissions. Says in replies & submissions the FMC order, on which the Sebi notice is based, is under challenge before the Bombay HC. So, Sebi should defer order till the court's decision |Mar 19: Sebi declares FTIL not ' fit & proper', asks it to divest its holding in five MIIs — MCX- SX, MCXSX Clearing Corp, Delhi Stock Exchange, Vadodara Stock Exchange and National Stock Exchange Will have to shed stake in MCX- SX, other exchanges THE SMART INVESTOR 15 > >CBI working with crazy logic: C B Bhave Click here to read more...   Click: Article continued from…FTIL not ' fit & proper' FTIL not 'fit & proper' to own bourse: Sebi An appeal was filed in the Bombay High Court against the FMC notice; a decision on that is pending. "Considering the facts and circumstances of the case, interest of investors and the securities market, I do not find any reason to defer passing of this order or defer the implementation of this order as pleaded by FTIL," said the Sebi order. FTIL and Multi Commodity Exchange ( MCX) hold a 4.99 per cent stake in MCX- SX. The two also hold warrants that on conversion will translate into a 69 per cent stake in MCX- SX. The Sebi move has come on the back of a CBI inquiry into the circumstances under which MCX- SX received recognition as a stock exchange. The CBI inquiry is also looking into the role played by senior Sebi officials, including former chairman C BBhave and whole- time member K M Abraham. Some ministers and bureaucrats, though, have come out in support of the duo. The order came within days of Bhave questioning in amedia interview if the original decision to grant recognition to MCX- SX merited an investigation and whether Sebi's role in allowing MCXSX to function after the payment crisis at NSEL should also merit one. Following initiation of the CBI probe, former home secretary GK Pillai, who had been appointed as MCX- SX chairman, quit last week. He served for less than five months. MCX- SX, which now has a board with public- interest directors, has been looking to raise capital through a rights issue. >FROM PAGE 1 Youth powerwanes in India's board rooms SACHIN P MAMPATTA Mumbai, 19 March In a nation celebrating the extent and size of its youth every other day, there is at least one place where the proportion of young people seems on a decline. Data suggest Indian companies are less inclined than before to appoint young people to their boards. The number of people named to the board of directors of Indian companies since 2006 who were 25 years or younger at the time of appointment add to 552. And, the current number of directors below the age of 25 is no more than eight, according to data from indianboards. com, which maintains figures on the composition in this regard of companies listed on the National Stock Exchange. "While some of them would have crossed the age of 25, others might have ceased to be directors. At least one thing is very clear, however, that the number of fresh appointments of directors who are less than 25 years has drastically come down. This can be attributed to greater public scrutiny on the composition of a board of directors," said Pranav Haldea, Managing Director at PRIME Database Group, which manages indianboards. com. There has been greater scrutiny over the composition of the boards of Indian companies, with questions asked about the ability and qualifications of those appointed. Corporate governance experts said age need not be a barrier to a board seat but ability should be given preference, rather than ties to the promoter. "Those below 25 don't necessarily have the experience to fill that role… unless it is an internet or technology company in which the person is there as an innovator… Generally, a director is less likely to be capable if he is related to the promoter," said Amit Tandon, managing director of Institutional Investor Advisory Services India Ltd. "Appointing a relative is not aproblem if the person is qualified. Communication is easier and it might be easier to work together. But appointing a person only because he is related to the promoter is not a good practice. Some of these directors also draw disproportionate salaries, Many promoters appoint directors to help maintain amajority on the board. Others bring on the next generation as a means of grooming them," said J N Gupta, founder and managing director at corporate governance firm Stakeholders Empowerment Services. Among the youngest directors is Shashwat Goenka, who at 23 years is serving as director of Firstsource Solutions. He has worked with Nestle and KPMG, having graduated from The Wharton School, University of Pennsylvania. He has a bachelor's degree in economics, with a specialisation in finance, marketing and management. Goenka is among the most qualified of his peers in the ' 25and- below' bracket of directors and doesn't think his life is too different from an average person his age. " To be honest, everyone my age is working, and working really hard. I really enjoy my work and for me, it is a relaxing activity! In fact, I look forward to going to work every morning," he said. "Till now, my contribution to the company has been limited. But I hope to be able to contribute to the best of my abilities… We have a good team in place, and we work very closely — I have learnt a lot from them." With all the 25- year- olds out of the picture, the average age of a director is 59 years, nearly asenior citizen. The largest proportion are in the age group of 46- 60, accounting for nearly athird ( 32.87 per cent) of the directors. Those between 61- 69 years make up another 20.3 per cent. Those between the age groups of 36- 45, 26- 35 and 7080 years are between two and 13 per cent. Number of directors under 25 drops 98% in 8 yrs; average age on boards now touches 60 INDIA'S YOUNGEST DIRECTORS NAME AGE Company Appointment date Education Priya Agarwal 24 Cairn India 01- 02- 2012 Graduate Jayvardhan Goenka 23 D B Realty 12- 10- 2011 Under graduate Arpit Khurana 24 Excel Infoways 08- 09- 2011 Schooling Shashwat Goenka 23 Firstsource Solutions 12- 05- 2012 Graduate Aman Jindal 25 Jindal Cotex 10/ 25/ 2010 Post graduate Sahil Jindal 25 Jindal Cotex 10/ 25/ 2010 Graduate Dnyanaraj Moravekar 22 Panoramic Universal 10/ 30/ 2009 Schooling Gautam Gupta 25 Supreme Tex Mart 1/ 28/ 2010 Graduate Source: indianboards. com, created and managed by PRIME Database There is greater scrutiny over the composition of the boards of Indian firms now

 

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CS A Rengarajan

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