New Delhi: Government on Tuesday banned trading in e-series contracts at the National Spot Exchange Ltd (NSEL) as it wants the exchange to first settle about Rs 5,600 crore dues to investors, Consumer Affairs Minister K V Thomas said.
"We have stopped trading in e-series contracts on NSEL. A notification will be issued in a day or two," Food and Consumer Affairs Minister K V Thomas told the agency today.
"We decided to stop trade in e-series as we want to see first NSEL settles the dues," he added.
Anticipating the government move, NSEL today suspended the trading in e-series contracts like gold, silver and some other base metals.
E-series contracts is a unique market segment, which functions like the cash segment in equities, but offers commodities in the demat form in smaller denominations.
The minister said that the commodity market regulator FMC is overseeing the entire matter and the government will give more power to it to ensure the settlement of payments.
"FMC is having full control of the situation. If more teeth is to be given to settle NSEL issue, we will give that to regulator through necessary amendments," Thomas said.
NSEL suspended on July 31 trading in all its one-day forward contracts except e-series products, leading to sharp fall in the share price of promoter FTIL and group entity MCX.
The development also raised concerns about the possible default in payments to investors.
Asked what assurance the government would like to give to investors, he said: "We are trying our best to see that there is no panic and on priority dues are paid to concerned players"
On whether the government will punish NSEL officials for violation of rules, Thomas said: "The law of the land will prevail. Why should we hurry for that. Are we interested to put somebody in jail or rather ensure settlement of dues to people?"
"Let us see. We have been very careful. We have been cautious. We have been watchful," Thomas said.
Asked if punitive actions against NSEL officials will be taken after settlement of dues, he said: "Law of the land will prevail. We are not here to create sensationalism, we are here to resolve the crisis."
NSEL was found to have violated of some conditions set by the government for operating the exchange. NSEL was allowed to offer one-day forward contracts provided members would not resort to short sales and that outstanding positions at the end of the trading day would result in delivery.
On the delay in taking action against NSEL, he said: "Had we asked them to stop trade at that time, the settlement dues would have been huge, say about Rs 21,000 crore. Now is around 5,000-6,000 crore. We were waiting for appropriate time."