NSEL: Stock brokers' body feels crisis is elevating

Talks going around that brokers ready to take hair cut

Two associations of stock brokers’ have raised concerns about the crisis created due to the suspension of trading in FT-promoted National Spot Exchange of India (NSEL).

Association of national exchanges members (capital market members) said that day by day the crisis is getting elevated as no one seems to have officially visited and assessed the stock in godowns of NSEL and also the valuation of it as on current prices is not known.

Another issue these associations are raising is that the solution worked out by the NSEL with borrowers, who have to pay Rs 5,600 crore, was done without taking lenders in to confidence.

R M C B Prasad Rao, president of Association of national exchanges members (ANMI) said that FMC now should ensure auditing of the stocks and valuation in NSEL’s warehouses.

He said “day by day reports are coming that are indicating that the crisis is elevating. 220 odd members of NSEL have been affected due to this.”

He said there is no information on how many have been affected but the estimates are ranging from 10,000 to 20,000. He is not ruling out the possibility that brokers got stuck by trading in their proprietary positions.

A talk is around in the market that some big brokers are discussing possibilities of taking a hair cut and getting money faster. However, Rao said “they have no such information at the association level.”

Falling commodities prices and quality which brokers and investors have not checked is another concern. One big broker having exposure said that all the borrowers are SMEs and hence for them getting banks' support will be difficult.

Even BSE brokers’ forum issued a press statement saying that, “Prominent stock and commodity brokers today suggested to FMC that audit and verification of stocks and more so of large borrowers is necessary. They said this in a meeting between Borrowers, NSEL and FMC on Sunday”.

FMC chairman Ramesh Abhishek asked members to suggest agencies to carry out the same as per press note issued by the BSE brokers’ forum.

Brokers also said that while finalizing settlement, the exchange has not involved lenders in the negotiation process and statements issued by NSEL are misleading.

Rao of ANMI said that FMC has suggested that borrowers should give bank guarantee along with the post dated cheques, which gives some comfort.

Priti Gupta, Executive Director, AnandRathi Commodities said that “with FMC getting involved in the issue, we feel solution is imminent and crisis is tapering off. we will however prefer our clients getting money on due date and waiting for five month is what brokers in general have not agreed on in their meeting with the FMC.”

She also said that their clients and even their team have been visiting warehouses of exchanges and have found goods moving in and out. Though they have not visited warehouse where wool has been stored.