Top-level shake-up in financial sector on the anvil

Top-level shake-up in financial sector on the anvil
Veeshal Bakshi & Sourav Majumdar

New Delhi/Mumbai, April 2: The Union Government has decided to initiate a major clean-up operation inthe financial sector which may include replacement of Securities & ExchangeBoard of India chairman D R Mehta, Unit Trust of India chairman P SSubramanyam and Reserve Bank of India's deputy governor (bankingsupervision) S P Talwar over the next few days.

The Government is veering to the conclusion that some of the top officialsin all these institutions would have to step aside to facilitate thecleaning-up process. Sources said the top officials being replaced at theseinstitutions may be asked to proceed on leave or quit.

With the government looking into the functioning of these threeinstitutions in detail following the latest scandal involving the bankingand stockmarket systems, it is now believed that a thorough overhaul of thetop brass has become inevitable.

On the Sebi front, its chairman D R Mehta may have to make way for someone else, while C B Bhave, former Sebi senior executive director who is now the managing director of the National Securities Depository Ltd (NSDL), is also being mentioned as someone who will find place on the Sebi board as a number two to the chairman. Bhave is known to be a no-nonsense administrator with an excellent track record.

Sources said the clean-up at Sebi will not be confined to Mehta. Atleast two executive directors and some division chiefs may also bereplaced.

Another major move being considered is to relieve UTI chairman P SSubramanyam and make UTI Bank chairman PJ Nayak the acting chairman of UTI.Nayak, a former executive trustee of UTI, is likely to be asked to holdcharge of the institution till a thorough probe is completed into itsfunctioning.

On the RBI front, there is understood to be a move to replace its deputygovernor (banking supervision) S P Talwar with Devi Dayal, currentlyspecial secretary (banking) in the finance ministry. Both Dayal andTalwar are due to retire in the next few months. Dayal has experience indealing with banking issues and is being seen as the ideal choice for theassignment.

The government is believed to be worried about the manner in which bothregulators have been virtually caught napping while the entire marketmanipulation and Madhavpura scam were taking place. While criticism has beenmounting against Sebi for failing to nab arrested stockbroker Ketan Parekhwhen he was ramping up prices and creating an artificial hype in scores oftechnology stocks, RBI is facing flak for the Madhavpura scandal, where thebank and Parekh together caused a Rs 137-crore hit to another public sectorbank, Bank of India. This apart, other cooperative banks have also figuredin connection with the bullion scandal and, together, the entire financialsector is now in a state of turmoil.