Chaotic System

In the context of investment options available with domestic investors in various safe avenues in the post-CRB scam era, I have a few questions:

First, are banks safe? CRB cap defrauded SBI and has also gone away with Rs 50 crore from small co-op banks of Gujarat. Four directors of Dadar co-op banks were recently arrested for committing frauds. A reputed Mumbai-based bank is under similar threat, and the Indian Bank scam is not too old.

Second, gold prices are continuously falling globally and are hovering around $340 per ounce at present. Prices have fallen in India too but the effect is not apparent due to rupee devaluation. Investment in gold is not even capable of taking care of inflationary pressures. Third, real estate requires big investment and the situation is not very liquid. Real estate prices too have gone down considerably.

 

Fourth, since the advent of Sebi, the primary and secondary capital markets are continuously going downhill. Sebi's policy seems to be short-sighted, arbitrary and aimed at reducing the number of players. Losses incurred by the investors are more than Rs 1,00,000 crore. Sebi has inculcated a very high-tech casino culture through the satellite route. Why should one invest if one has seven days to speculate.

Fifth, perceived like a plague by investors, mutual funds are no better either. Sebi's showed its alertness in regulating MFs by calling a meeting of CRB MF trustees on May 21, when the dust had already settled on the scam.

Sixth, the money market seems like a bottomless pit after the CRB episode. The government has lent credibility to the CRB group by sanctioning IT benefits under Section 88 to its power bonds only in March 1997. Such sanctions seem to have been accorded without going into the fundamentals of the company. For the present chaotic conditions in our system, the onus squarely lies on Sebi, RBI the government.