NSEL Crisis : When will investors be paid back?

[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]I[/dropcap]t has been over 3 years since the Rs. 5600 crores ($838 million) payment crisis at the now defunct NSEL (National Spot Exchange Ltd) a commodity trading exchange.  There have been agitations by investors, multiple high profile arrests, property attachments, numerous court cases. However, the one major thing missing is that no significant payment has yet been made to the investors so far.

Depending on who you speak to, you will get different reasons for what led to the crisis; but each one of these played its part in inflating the bubble to Rs.5600 crores ($838 million).

There is the usual blame game of who is responsible for this crisis. Some of the most common reasons cited are

• Regulatory vacuum,
• incomplete state policies lacking foresight,
• grant of exemptions,
• aggressive misselling by intermediaries,
• inept handling of event leading up to the crisis,
• corporate vengeance,
• nexus between NSEL employees & defaulters,
• lack of operational controls at NSEL

Depending on who you speak to, you will get different reasons for what led to the crisis; but each one of these played its part in inflating the bubble to Rs.5600 crores ($838 million).

Various steps have been taken before and after the crisis to try and bring relief to the investors. Major amongst them include:

1. designating the Forward Markets Commission (FMC) as the regulator for NSEL,
2. FMC halting trading in the disputed contracts,
3. applying MPID (Maharashtra Protection of Interest of Depositors in Financial Establishment Act) in this case
4. arrests of various stakeholders which include defaulters, brokers, employees & promoters of NSEL
5. investigations by various agencies including Mumbai EOW(Economic Offences Wing), FIU (Financial Intelligence Unit), CBI (Central Bureau of Investigation) & ED (Enforcement Directorate) .
6. Attachment of properties by EOW & ED which in total are said to be valued more than Rs. 5,600 crores ($838 million)
7. Merger of NSEL with its parent company
8. SEBI investigation on the role of brokers in the NSEL crisis
9. Setup of special court for all NSEL cases
10. Detailed investigation and report by Special Team of Secretaries (STS)
11. Periodic review by Secretary, Department of Economic Affairs, of actions based on the STS review

For any person who has been cheated out of their money, the above seems to be an outstanding list of actions that could help them recover their hard earned money. Unfortunately, that is not the case for investors of NSEL. Despite what seems to be a comprehensive set of steps taken, the investors are hardly any closer to recovering their money. Some investors even feel that the situation has continued to become more convoluted due to the judicial process with no hopes of recovery in sight.

In such a situation what practical steps can be taken to speed up the process of recovery so that investors get their money back?

To be continued…

Note:
1. The conversion rate used in this article is 1 USD = 66.84 Rupees.
2. Text in Blue points to additional data on the topic.

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Aashish Shetty

Aashish is a technology & finance professional with many years of global experience in multiple roles.

He is a frequent contributor on Banking, Money, Investing, Technology and Education.

Detailed bio & posts - https://www.pgurus.com/as/

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