Friday, July 13, 2007

The SEBI-NSDL face-off

NSDL – National Securities Depository Limited was awarded the mandate by PFRDA (Pension Fund Regulatory and Development Authority) to act as the CRA (Central Recordkeeping Agency) for the new pension scheme in April this year. The CRA keeps track of the contributions of the subscribers to the scheme and also the government which puts in a matching share besides the earnings of the subscribers and related data.

When NSDL sought SEBI approval for acting as the CRA of the new pension scheme, SEBI rejected it saying that it is a non-core function of the NSDL and is outside the law. To buttress its argument SEBI has given two reasons as to why this non-depositary activity is fraught with risks and liabilities and how it endangers the integrity of the depository system:

  1. Any liability incurred on account of such activity is likely to endanger the net worth and solvency of the depository.
  2. Common information systems may result in breach of security of the depository system.

But NSDL bases its argument backed by strong legal opinion which says that NSDL is not barred from undertaking an activity which is not its core function.

The government is expected to step in and solve the dispute.