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The Reserve Bank of India on Monday said the crisis in National Spot Exchange Ltd (NSEL) has raised the issue of interconnectivity among financial institutions thereby exposing regulatory gaps prevailing in systemic institutions.
According to RBI, “Many brokerage firms are active in multiple segments, including equity, commodity and forex. A loss in one segment of their operations can have a cascading effect on other segments, in turn, propagating contagion effects throughout the market.”
The Union Government has taken several policy initiatives to plug regulatory deficiencies. It has transferred the administrative control of FMC to the Ministry of Finance and constituted two committees, one under RBI Deputy Governor K.C. Chakrabarty and the other under the Secretary, Department of Economic Affairs, Arvind Mayaram, to look into various aspects relating to this crisis.
These committees have since submitted their reports to the Centre, the RBI said.
On the directives issued by the Ministry of Consumer Affairs, NSEL decided to suspend trading of all contracts, including e-contracts as well and settle all one-day forward contracts under the supervision of the Forward Market Commission.
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