Mumbai: The search for the next Indian capital market regulator at Sebi is nearing completion with three finalists emerging after four candidates were interviewed on 29 January, even as incumbent M. Damodaran was also found eligible for reappointment if the government so chooses.
According to people familiar with the matter, the search committee forwarded three names to the Union government. They are Jaimini Bhagwati, additional secretary, economic relations, ministry of external affairs; U.K. Sinha, chairman and managing director of UTI Asset Management Co. Ltd and M.B.N. Rao, chairman and managing director of Canara Bank.
The panel also said current chairman M. Damodaran can be eligible for reappointment.
The panel met four prospective candidates, including C.B. Bhave, chairman and managing director of National Securities Depository Ltd. Bhave’s name is no longer on the shor-tlist largely because of an ongoing legal battle between the Securities and Exchange Board of India and NSDL, which is India’s premier depository.
It is unclear when the government will make up its mind for what has emerged in recent years as a high-profile job in keeping with global interest in Indian capital markets and a spreading stock-ownership culture within the country. And it is quite possible that a last-minute candidate could yet emerge from outside the four in the field.
Before his current stint at the ministry of external affairs, Bhagwati, a finance professional, headed the corporate finance division of World Bank’s treasury between 2002 and 2005. He was also a joint secretary, capital markets, ministry of finance.
Sinha, too, was a part of finance ministry as joint secretary, capital markets, before he took over as head of UTI AMC.
Rao, the chief of Canara Bank, and also the chairman of Indian Banks’ Association, will retire in June this year.
Damodaran was also called for an interview but he did not appear before the committee, chaired by cabinet secretary K.M. Chandrasekhar. Instead, people familiar with the matter said he wrote a letter to Chandrasekhar, saying he can be judged by his track record.
Damodaran took over as Sebi chairman on 18 February 2005 for a three-year term. Going by the Sebi Act, the chairman can hold his post for a three-year period or attaining of the age of 65, whichever is earlier. Damodaran, who was in Amsterdam attending an International Organization of Securities Commissions meeting, will turn 61 in May.
In a recent interview with Business Line, a business daily, Damodaran said he has no plans to seek an extension when his tenure as capital market regulator expires.
“I am not looking at an extension. I am not an applicant, supplicant, job-seeker or even a candidate... I want to move on,” Damodaran was quoted as saying when he was asked whether he was aspiring to continue as Sebi chairman once his current term ends.
As for Bhave, the Sebi-NSDL saga began in April 2006 when Sebi unearthed a scam involving depositories, depository participants and two dozen market operators, who allegedly played a role in using 59,000 fictitious demat accounts in cornering share allotments in initial public offers (IPOs) for small investors.
In an ex-parte order, Sebi had said that the depositories “failed to exercise oversight over the depository participants” and the promoters of NSDL (and CDSL, another depository) were directed to take “all appropriate actions including revamping of management.”
In November 2006, Sebi ordered NSDL and a few others implicated in the IPO scam to return Rs115 crore in “illegal profits” made from the IPO deals. Of this, NSDL’s share was Rs45 crore. NSDL appealed to the Securities Appellate Tribunal, which, in December, set aside the Sebi order, describing its action as a clear “violation of the principles of natural justice.” Sebi investigation on the IPO scam isn’t concluded.
“Under these circumstances, Bhave’s name cannot possibly be there as there is moral issue involved,” a person familiar with the development pointed out.
Damodaran is only the fifth Sebi chairman. His predecessors were G.N Bajpai, D.R. Mehta, S.S. Nadkarni and G.V. Ramakrishna.