We don't see the possibility of a default now: Anjani Sinha

Interview with MD, NSEL

Anjani Sinha, managing director and chief executive officer of National Spot Exchange Ltd (NSEL), spoke to Rajesh Bhayani on the exchange's settlement plan proposed on Wednesday. Edited excerpts:

The exchange had said over Rs 2,000 crore will come by maturity and the rest in 20 instalments via post-dated cheques. Why, then, the delay in completing settlement?

Due to bad publicity in the past few days, several parties (24 in total) have said their banks have cut or withdrawn facilities - line of credit - on which they were banking upon. The money that was expected early was not received as those who were comfortable in making payments have also found problems. Hence, we had to renegotiate everything and we had to come to the most common acceptable terms. This is an issue of market disruption and not of a default. So the settlement calendar proposed is longer.

Will people continue to get interest on their investment?

Those who have invested money will get interest on their outstanding and buyers will have to pay interest. Interest will be paid over and above the weekly amount we have declared as part of the settlement.

Will this be acceptable?

We have discussed the settlement with buyers and took feedback from members; this settlement was found acceptable. According to our proposal, those who have put in money will get interest and the money back. Since their purpose was to get returns, they should not have any issues. Buyers will get time to pay and the exchange will ensure settlement and default can be avoided.

According to exchange norms, in case of a default, who is declared a defaulter? A client who is not making payment or a broker-member through whom he has entered the deal on the floor of the exchange?

We don't see the possibility of a default now, but exchange rules suggest a broker-member will be declared defaulter. However, all 25 buyers in this case were members of the exchange.

Has the Forward Markets Commission (FMC) approved the plan?

They have communicated to us the receipt of the plan and we had a meeting with the regulator today (Wednesday). They have not accepted or rejected the plan but has said that if anybody raises any issue, then FMC will look into that.

There were several complaints about the quality and valuation of stock lying in the warehouses...

That is a non-issue now as buyers will pay and people will get money with interest. However, we have assigned the work of valuation and quality verifying work to a Swiss firm, SGS. We will use SGS's reports for our internal purpose. We are expecting the report in 10-15 days.

Shouldn't small investors have been paid first?

There was no clear cut directive and hence we are making proportionate payment.

Several investors have invested in e-series? How much quantity of precious metals were they holding in demat?

Every day, 200-300 investors are coming for converting their investment into physical delivery. Gold was around 950 kg out of which 60 kg gold has so far been converted. Out of 48 tonnes of silver in demat, 1.5 tonnes to 2 tonnes have been converted into physical delivery. Most investors are holding on to their investments in demat.