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The announcement comes after NSEL said on Sunday that most of its trading members had proposed settling outstanding contracts over several months after the suspension of forward trading.
Jignesh Shah, vice-chairman of NSEL, said at a media briefing today that trading members who do not fulfil their payment obligations would be charged a 16% interest, without clarifying on the time periods in which it would be applied. The exchange is expected to announce the final settlement schedule for all outstanding contracts on August 14, Shah said.
The FT shares gained 33.6% to close at Rs.197.1 on NSE with huge volumes, recovering from a 73% fall in the previous two sessions sparked after the commodity exchange suspended trading in most forward contracts last week.
Later in the evening, the Forward Markets Commission told the exchange that it had to give priority to 7,000 small investors who have exposure of less than Rs 10 lakh each. all investors below Rs 10 lakh. Also, NSEL can’t take financial transaction with group company MCX.
Small investors account for 54% of the total 13,000 investors. The FMC has also asked Multi Commodity Exchange, another FT group firm, not to take any financial burden on it without the regulator's permission.
FMC, which is holding series of meetings with various intermediaries, has already asked the exchange to deposit money that it is collecting from borrowers in an escrow account. Sources in the ministry of consumer affairs said that a notification will be issued shortly to make FMC the regulator for spot commodity exchanges also.
The oversight committee set up by NSEL in consultation with FMC is chaired by Sharad Upasani, former chairman of the Company Law Board and would have R J Kochar, former judge, Bombay High Court, G N Bajpai, former chairman, SEBI & LIC and D Sivanandan, former director general of police, Maharashtra as members.
In addition, NSEL has also constituted two committees of members (seller side) and plant owners to convince counterparts in their respective fraternity and settle the issues, if any, in case of payment delays.
“All these committees have been formed for smooth payout of dues in the entire system of spot commodity trade and avoid any incidence which may have consequential impact on the larger market,” Shah said.
NSEL said it would start trading only after the government clarifies its stand on 11-day contracts. In case such contracts are not allowed, the exchange will diversify its business in addition to its existing e-series contracts. It will begin procurement on behalf of government agencies like Nafed. Also, the exchange will look for new business opportunities in related space.
Eight entities are willing to pay about Rs 2,181 crore as per the scheduled due date or earlier. Another 13 entities have offered to pay about Rs 3,107 crore in weekly instalments, while negotiations are on with three others for payment of Rs 311 crore.
Talking about the drastic decline in the settlement and guarantee fund (SGF) from Rs 800-odd crore to a mere Rs 60 crore, Shah said, “The fall was based on the calculations of the stocks and margins paid on them to the exchange. There could have been a similar decline in the overall payout overdue also.”
Significantly, the exchange removed all the addresses of warehouses from its website. At the press conference, Shah had no answer to many questions from reporters on the grounds that that the questions being put to him were too micro and only CEO Anjani Sinha would be able to answer those.
Shah also could not throw light on whether NSEL had adequate stocks in its warehouses to cover a potential default and why the exchange’s risk apparatus failed tod etech the problem.
He also did not give the exact value of outstanding trades despite repeated questions and said the number would be disclosed later on the NSEL website. He said that broker wise exposure to the contracts will also be put up on the website.
Some broker associations are also not happy with NSEL working out a solution with borrowers without taking lenders into confidence. R M C B Prasad Rao, president of the Association of National Exchanges Members (ANMI), said that FMC should ensure auditing of the stocks and valuation in NSEL’s warehouses.
Even the BSE Brokers’ Forum issued a statement saying that, audit and verification of stocks and more so of large borrowers is necessary.
