Different Strokes

Paper nexus

While on rigging, stock market punters talk openly about usingnewspapers to plant stories to help their rigging operations. The biggest buzz is about the links of a large and notorious mutual fund or brokers dealing for it, with a couple of newspapers. There is a clear pattern between the funds’ stock churning and news reports. In a stock market where most transactions are speculative and non-delivery based, a report even if it is denied the next day allows big profit opportunity. At a recent SEBI meeting, someone recommended following up on the Malegam Committee suggestion to regulate journalists giving investment advise. Scribes’ involvement in speculation has been caught and punished often enough in the US. However, the SEBI top brass is against any such move against the press. It only objects to criticism against itself.

Careful with PFs

During the dying days of 1998, Planning Commission member Montek Singh Ahluwalia once again suggested equity investment by provident finds as a way to revive the stock markets. Those who suggest investment of theirsavings in equity should probably know that even Arthur Levitt, Chairman of the US Securities and Exchange Commission has questioned the wisdom of allowing social security to invest in the stock market. He said, half of all Americans do not know the difference between a stock and a bond, and… giving people the opportunity to select investment options will “provide the unscrupulous with new opportunities to deceive and distort”. Playing with the lifetime savings of people can only be worse in India, where corporate governance is low and the unscrupulous usually go unpunished.

Evergreening? Not here

The Narasimham Committee wrote about it. Standard and Poors negative rating outlook on two FIs and a bank. Credit Lyonnais has come up with a report which is categorical about the high incidence of evergreening of accounts by Indian banks — but not the RBI. High level sources in the RBI say that their inspection reports have only come up with four or five cases of evergreening of loan accounts bybanks — that is, giving fresh loans to companies to pay back old loans so that the old ones are not classified as bad loans. Does it mean that the Narasimham panel and everyone else was exaggerating? The RBI is not sure about that either. After all, many of the critics are insiders. Then there must be something wrong with RBI’s inspection reports. Well, the RBI is taking another look at its inspection process. While on the RBI, a little bird overheard discussions at North Block about reconstituting its central board of directors. One of the names being mentioned is that of the Reliance Group patriarch Dhirubhai Ambani. If invited, it will mean an official recognition of the establishment of the unconventional and often controversial Dhirubhai’s contribution to Indian business and economy. If he accepts it, it would mean a big departure to the senior Ambani’s policy of staying away from such boards as well as associations and chambers of commerce and industry.