NEW DELHI (PTI): India’s Federal Finance Minister, Dr.Manmohan Singh, August 4 rejected an opposition demand for his resignation in the wake of the multi-billion rupee securities scam, gave a clean chit to the reserve bank of India governor and assured full cooperation to the proposed joint parliamentary committee in finding out the truth.

Replying to a 10-hour special discussion in the lower house of parliament on the scam, Dr.Singh said anyone, howsoever high or mighty, found guilty would be punished and rebutted charges of laxity on the part of finance ministry or the RBI that led to the scam,

The country’s financial and banking circles were shaken by the securities scam in which billions of rupees were diverted by banks with the connivance of high government officials to the stock market, A false boom was created by heavy investment and a number of small time investors suffered losses following the busting of the scam by RBI.

The minister’s reply was marked by a walkout by members of the Janata Dal, Communist Party of India-Marxist (CPI-M) and Communist Party of India (CPI) objecting to what they considered was “unbecoming” remarks against communist parties.

Dr.Singh admitted that the scam was the result of a “systems failure” and collusion between bank managers and stock market operators and added that with a view to prevent recurrence of such scandals a strong supervisory agency was being set up.

Rejecting the demand for his resignation and sacking of RBI chief, the finance minister said he did not subscribe to the “outmoded theory” that just because a theft occurred in a village the “mayor” should resign.

The finance minister said the securities scam had its origins probably in 1990 when the “sensex” in stock exchanges had started showing an upward wend and possibly there was diversion of funds from the banking system to the stock market. He felt that this was mainly due to the tight money policy followed by the government.

Asserting that he would not plead guilty to the charge of negligence, Dr.Singh said immediately after he took over he was worried about the rise in the sensex,

He said the chairman of the securities exchange board of India had written to the department of economic affairs about the rise in the sensex in January last year and following an RBI study was appointed to go into it. This led to the detection of bank of Karad operations but it was decided to give it a warning before initiating any action as the new credit policy was being formulated then, Dr.Singh said.

About the charge of losses made in public sector disinvestment, Dr.Singh said though the Janakiraman report found that the state bank of India and Allahabad bank had sold shares in violation of RBI guidelines, he doubted if there were any violations in strict sense of the guidelines, “Whatever was humanly possible was done by the government but I will pursue this matter and take action against anyone found guilty,” he said.

He also fully defended the finance secretary meeting Harshad Mehta a few days before the budget saying that he was doing it in his official capacity when a planning commission member wanted him to do so.

The finance secretary’s conduct is absolutely above board,” he said.

Dr.Singh regretted that “wild charges” had been leveled in the house against the wife of a senior official in the department of economic affairs of having influenced decision making in “Canfina,” a sister concern of Canara bank.

About the appointment of “kith and kin” of senior bureaucrats in foreign banks, he said though he was not against that in principle, he had asked the cabinet secretary to conduct an inquiry into such appointments. Anybody found guilty would be punished, he said.

The finance minister also offered to submit himself and his officials to an inquiry by the leader of the opposition into charges of misconduct and abide by his decision.

About the charge of “leakage” of coupon rates to foreign banks, Dr.Singh said he and three others were involved in the decision making in the affair and asserted that none of the four had leaked it to anyone,

I take full responsibility for the conduct of my officials and abide by the ruling of the leader of the opposition on any matter referred to him,” he said.

The finance minister also regretted “wild charges” against foreign banks and felt that such a trend would discourage foreign investment in the country. However, he said a special audit had been Launched into the stock market operations of four foreign banks.

He also disapproved of the criticism that the scam was the result the new economic policies and said government’s attempt was to remove the “excessive discretionary control” regime which gave rise to corrupt practices.

Admitting that the RBI could have been more alert about the bad practices in the stock market, Dr.Singh said the public debt office in the RBI had been computerized for taking up day-to-day reconciliation of transactions, which would enable quick detection of frauds.

Article extracted from this publication >> Aug 14, 1992