Amidst the ongoing efforts to establish a new government at the center, the Securities and Exchange Board of India (SEBI) has made a notable move by appointing Usha Thorat to a significant position. As reported by Business World on June 5th, Usha Thorat, who has close associations with the Gandhi family, has been designated as the Chairperson of the Committee on Settlement Guarantee Fund of Stock Exchanges. This appointment has raised eyebrows, particularly due to its timing and the selection of Thorat, highlighting SEBI's decision during a critical period.
Usha Thorat former deputy governor of the Reserve Bank of India (RBI) | Business Standard
The report underscores that Usha Thorat is married to Yashwant Thorat, a former CEO of the Rajiv Gandhi Foundation and former Chairman of NABARD. This connection has sparked interest and speculation regarding the implications of her appointment. As the political landscape shifts following the recent Lok Sabha elections, the timing of SEBI's decision to appoint Usha Thorat adds a layer of intrigue to the unfolding developments in India's financial and political arenas.
SEBI's Political Chess: Usha Thorat's Appointment Raises Eyebrows
In a strategic move that's raising eyebrows, the Securities and Exchange Board of India (SEBI) has appointed Usha Thorat, known for her close ties to the Gandhi family, to head a crucial committee. With Sonia Gandhi chairing the Rajiv Gandhi Foundation and prominent members like Rahul and Priyanka Gandhi, along with P. Chidambaram, the connection underscores Thorat's proximity to India's political elite.
Thorat's history in influential financial circles adds layers to SEBI's decision. During the UPA government, when figures like P. Chidambaram held sway in the finance ministry, Thorat served as the deputy governor of the Reserve Bank of India. Additionally, her tenure as a board member of the National Stock Exchange during the UPA era further solidifies her standing in financial circles.
The timing of Thorat's appointment, coinciding with the day of election results, has sparked speculation about SEBI's intentions. Some observers view it as a lack of confidence among certain SEBI officials regarding Prime Minister Modi's return to power. With only Thorat's appointment announced thus far, the composition of the committee remains shrouded in mystery, fueling further intrigue.
SEBI’s Statement
“The dominance of the parent exchange in the ownership structure invariably exposes a clearing corporation to the expectations of shareholders of the parent exchange, with the financial statements of clearing corporations being incorporated in the consolidated financial statement of the parent exchange,” said Sebi.
“The securities market has also witnessed a structural change in recent times, with exponential growth in derivatives across the investor spectrum. Derivatives, being leveraged products, invariably increase the tail risk in markets. Therefore, the need for resilience of a clearing corporation, especially in times of market stress, cannot be overstated,” said Sebi.
BSE's Financial Dilemma: Rising Liabilities and SGF Concerns
According to the report, the Bombay Stock Exchange (BSE) faces mounting liabilities towards SEBI fees and has had to reverse substantial charges related to bulk SMS billed to the investor fund, amounting to nearly Rs 150 crore. However, a significant concern is the potential obligation of BSE to pay substantial amounts to the Settlement Guarantee Fund (SGF) due to the escalating volumes at the exchange.
The SGF operates on the principle that as the trading volume of an exchange increases, its contribution to the SGF should also rise accordingly. Last year, the NSE paid approximately Rs 5000 crore more to its SGF.
The notional volumes in derivatives at BSE are nearly three times higher than those at NSE. Even with conservative estimates, if BSE has to pay around a couple of thousand crore to the SGF, it would significantly impact the exchange's profitability and its surging share price, which certain market participants are attempting to boost, according to the report.
Earlier this year, the exchange's share price experienced a decline due to its higher SGF for the currency derivatives segment, as acknowledged by the exchange's statements to the media. In this context, SEBI's swift formation of a committee on SGF and the appointment of Usha Thorat as its chairperson have sparked curiosity among market experts.
Corporate India maintains Unusual Silence on PM Modi’s Inevitable Third Term
In the report, Palak Shah observed that although top Indian business leaders are typically astute, they have opted for an unusual silence regarding the outcome of India’s elections.
It is evident that the NDA holds the majority, with Narendra Modi being unanimously elected as the alliance leader, securing his position as Prime Minister of India for a third consecutive term, a historical feat placing him second only to Jawaharlal Nehru in this regard. This raises questions as to why corporate India remains tentative about the election outcome.
The report underscores that prominent figures such as Uday Kotak, Anand Mahindra, Sunil Mittal, Mukesh Ambani, Kumar Birla (honored with a Padma Bhushan by the BJP), Harsh Goenka, as well as notable faces and fund managers associated with the PM’s Economic Advisory Council, have chosen to maintain their silence and have refrained from congratulating PM Modi on the NDA's victory in the Lok Sabha elections.
Interestingly, the sole tweet on social media platform 'X' extending congratulations to the PM for his third term on the day of the election results came from NSE MD and CEO Ashish Chauhan, the report notes.
It is noteworthy that numerous foreign leaders, including US President Joe Biden, Italian President Giorgia Meloni, and Israeli Prime Minister Benjamin Netanyahu, among others, have extended their congratulations to PM Modi for this historic achievement.
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