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NSE Scam: Insiders speak of a savvy Chitra Ramakrishna and a closely knit trio, dismissing the ingenue story

The former MD seemed well connected and savvy, and not an easy mark as the exchange's investigation would have us believe.

February 17, 2022 / 03:21 PM IST
NSE scam's unfolding began with a whistleblower letter in 2015. (Photo: Pexels)

NSE scam's unfolding began with a whistleblower letter in 2015. (Photo: Pexels)

Yet again, the National Stock Exchange (NSE) has hit the spotlight. This time, with a story fit for a low-budget Bollywood movie. 

An unidentified yogi meditating in the distant Himalayas won the devotion of the leader of the country’s top bourse, ‘guided’ her decisions that could impact millions of investors and coaxed her into sharing confidential information. This, over twenty years.

Somewhere along the line, the two seem to have vacationed at beaches together too.

That is the story that has been sold to the regulator, the Securities and Exchange Board of India (Sebi), to explain corporate misgovernance at NSE on an unprecedented scale. But, the bigger shock is that the Sebi seems to have bought it and let everyone go with a metaphorical rap on the prayer beads.

Read also: Sebi order raises more questions

Insiders say, the regulator needs to take a closer look at a closely knit trio–Chitra Ramakrishna, former CEO and MD of NSE and who is at the centre of the scandal; Anand Subramanian, former group operating officer and advisor to MD and CEO, and the now infamous hire; and Sunitha Anand, who was the South Head of NSE and is Subramanian’s wife.

Chitra, according to one independent source, is related to Anand Subramanian.

Were these connections revealed to the regulator and investigated? Insiders say these connections were largely unknown even among the employees, and if the Board had been aware of it, had chosen to ignore it.

The trio was extremely talented as professionals, according to people this correspondent spoke with.  While Chitra appeared to be a “polite, smiling and simple person”, those who knew her well, knew that she could also be shrewd and resourceful.  

This source added, “Somewhere along, she managed to establish a strong contact with Delhi.” Her influence cut deep, sources said. “If I met anyone in Delhi, she would instantly come to know of it,” said a top source.

Somehow, this description does not fit well with the ingenue story, which has been sold to and bought by the regulator.

Her connection in Delhi appears to have blinded the higher ups. 

Its public interest directors,who are Sebi appointees to ensure that the functioning of the exchanges do not go against the interests of the market, seems to have been unaware about her sharing confidential information with an outsider. NSE’s Remuneration and Nomination Committee, which should have asked questions on Subramanian’s appointment and remuneration, seems to have remained silent. She seems to have been allowed to take unilateral actions. 

All of this came to light only when Sebi was investigating the co-location scam, which was reported by a whistleblower in 2015. 

The beginnings

NSE was founded in the early nineties by various private and public entities, including domestic and international financial institutions, with IDBI playing the dominant role. Ipso facto, a huge credit for building the institution went to those select personnel who came from the IDBI. RH Patil who was the executive director at the development institution became the founder of the new exchange. Ramakrishna and Ravi Narain, former vice-chairman of the exchange, who has also been fined, too were IDBI imports in these early days. 

NSE clearly had the blessings of the government at the Centre. In fact, the government had encouraged the setting of the new bourse as competition to Bombay Stock Exchange (BSE).

Read also: NSE responds to SEBI order on governance lapses

No surprise that it expanded across India. “A parallel could be found in the growth of Sun TV Network in Tamil Nadu which had the blessings of the government,” said a top broker in Chennai, who declined to be named. None could dispute the fact that NSE had enormously talent built into it.

In 2015, the first big alarm went off. 

A whistleblower wrote to the regulator that a few brokers were getting preferential access to the price feeds, because of where the brokers had located their servers. Their servers were placed close to the NSE’s servers which, the whistleblower claimed, gave them milliseconds-long headstart. Milliseconds can change fortunes in high-frequency trading.

In December 2016, Ramakrishna resigned as MD.

When Sebi started investigating this, they found out that Ramakrishna had been sharing sensitive information with an outsider–the yogi–via emails and found that Subramanian was copied on these emails. That’s how Subramanian’s appointment came under the scanner.

More bizarre details came to light.

A non-entity in the industry when he was inducted into the NSE, he went on to become powerful within the organisation. He had been working at Balmer and Lawrie in mid-level management drawing a salary of Rs 15 lakh. At NSE, he was hired as group operating officer and functioned also as advisor to the MD for an annual salary of Rs 1.68 crore in 2013, which shot up to over Rs 4 crore in 2016. His appointment, his remuneration and what not–if one were to go by the findings of the SEBI order – were never in accordance with the procedures. 

The regulator’s response to these lapses has been incomprehensible.

For letting an unknown outsider hold the reins of nation’s largest bourse, Ramakrishna has been fined just Rs 4 crore – forfeiting the excess leave encashment of Rs. 1.5 crore and deferred bonus of Rs.2.83 crore paid to her.

For failing in their oversight, the NSE and her boss Ravi Narain were fined Rs 2 crore each, and VR Narasimhan was fined Rs 6 lakh.

V. Ranganathan, former Director and Partner in Ernst & Young LLP, is aghast that Sebi chose to ignore the governance failures at NSE.

“SEBI’s indifference to step out of its crease to play an active and aggressive oversight role of engaging with the company’s top management and the board to sense the culture and commitment of the organisation to uphold the best principles of leadership, demonstrating ethics and values that the organisation seeks for companies listed on its board for trading, is, unfortunately, most evident,” he told Moneycontrol.

The way the NSE shenanigans unfolded has left many a market pundit dumbfounded. NSE’s market capitalisation at $3.4 trillion is bigger than the country's GDP (gross domestic product). Still, Sebi let several summers pass before taking action. 

The moot point is why did the Centre allow this inordinate delay in action on the part of the regulator especially since NSE is a prestigious institution.

The regulator’s focus appears to be more on the influencer ‘yogi’ and the influenced devotee. Unfortunately, the erosion–nay compromise–in the institution's integrity, which could have had unseen financial damage of a manifold size, has been conveniently brushed aside. 

To quote one top stock broker, who spoke on condition of anonymity, “You have made India a laughing stock on the world stage”. 

The question is for whom.


KT Jagannathan is a senior journalist based in Chennai