FMC trashes NSEL's figures

Suspects default in first payment; exchange releases list of buyers & sellers

National Spot Exchange Ltd (NSEL) on Monday found itself stuck in a familiar situation - in the line of fire from the consumer affairs ministry, as well as the Forward Markets Commission (FMC).

Within hours of the exchange posting a detailed list of buyers and sellers on its website on Monday, FMC threatened serious action against NSEL for giving incorrect information. The regulator also raised doubts over reliability of the figures given by the exchange.

Citing sharp differences in the figures presented by NSEL on various occasions (see table), FMC said it doubted the NSEL management's seriousness about settlement of outstanding obligations.

Earlier in the day, the ministry said there might have been default in the first pay-in by buyers on August 16 and wanted the exchange to take action against defaulters according to its own bye-laws. The government is also considering conducting audit of physical stocks lying in NSEL's warehouses by a government-appointed auditor.

A group of NSEL investors on Monday met Consumer Affairs Secretary Pankaj Agarwal. "Friday (August 16) was the first day of payment and there might have been defaults. We have asked NSEL to declare the list of defaulters and take action against them according to its own bye-laws," Agarwal told reporters. He said NSEL, being a guarantor, had been told to behave like one and get its stocks audited by a government-appointed auditor.

Later, the investors also met Consumer Affairs Minister K V Thomas and told him his department had the responsibility of solving the crisis, as FMC functioned under its purview. The investors also met finance ministry officials.

FMC's late-evening letter also highlighted non-compliance with its directives on several occasions. For example, the regulator had directed NSEL to give, on a daily basis, detailed information about party-wise deposits in the escrow account and disclose it on its website. "But, till now, you have not complied," FMC said.

Also, NSEL has to make a pay-out of Rs 1,159.55 crore to the Indian Bullion Market Association Ltd (IBMA). However, according to member-wise/client-wise details given to FMC on August 16, the amount had risen to Rs 1,171.36 crore. It was further revised to Rs 1,170.10 crore the next day.