Grey areas make corporate governance cases a challenge, says SEBI's S Raman

When you take control of your destiny, a 46-year career could see you rise from being a clerk to Chairman and Managing Director of a public sector bank before finally taking up the regulator's mantle. That's the story of Sunder Raman, the outgoing whole-time member at the Securities and Exchange Board of India (SEBI). A post graduate and gold medallist in economics, Raman joined State Bank of India as a clerk in 1974 and went on to head Canara Bank — where his father once worked — from 2010 to 2012. After spending five years at SEBI, Raman says he leaves on a satisfactory note with the latest and significant directive on disclosure norms for corporate defaulters. Earlier last month, in a first-of-its-kind move to increase debt disclosures by corporate entities, the market regulator tightened the norms for listed companies by making it mandatory, starting October 1, to disclose defaults on their loan (including bonds) repayments within one working day. In a freewheeling chat with Moneycontrol, Raman looks back at his tenure and expresses his views on hot-button issues such as bad loans and corporate governance. Excerpts Q With listed corporate entities having to disclose loan defaults within one working day, how much impact do you think this move would have? A It is very transformative and will ensure real-time information to everyone. A banker can access who is considering a loan proposal of a particular company. This move will not let anyone (borrowers) escape any lender without information. This is most likely to change the behaviour of the borrowers. The entire NPA problem was created was out of such behaviour - borrow recklessly, funds are available, banks have no other way, etc. We were wondering how do we arrest the problem? We had to bring in discipline and we thought that no one knows what happens in the 90-day period. There were a number of cases where smart operators shifted themselves from one bank to the other, doing a lot of hanky-panky adjustments both among corporates and banks, more so in non-public sector banks. Q What about penalties for non-disclosures? A Penalty is dependent on the gravity of non-disclosure. Q The credit for SEBI's handling of the Collective Investment Scheme (CIS) matter goes to you. However, should the government create a separate entity for regulating CIS or should SEBI stop regulating it? A When I joined, there were many cases which were attracting adverse attention and we tackled this problem in a a two-year time-frame. We have passed orders on more than 300 cases and the rest we have transferred to other regulators which do not come under SEBI’s purview. Even the Supreme Court felt that SEBI had done a commendable job in the case of CIS. When SEBI started passing strong orders against entities, there was a feeling that all such cases should be transferred to SEBI for investigation. Q We have seen high-profile corporate governance cases in your tenure involving the Tatas and Infosys. What is your take on these matters? A In corporate governance, there are lots of grey areas. Two parties can have bonafide but exactly opposite opinions. It is something contentious and it is something which cannot be concluded. There are two sharp opinions and it is challenge for SEBI also. We generally watch what is happening in these cases. We enter when we find out there is a clear-cut case of violation of some guidelines, whether listing of disclosure regulation or others. There are cases where some promoters who are not the part of the board are getting information. This corporate governance committee is reviewing whether these promoters should get information when they are not part of board, what sort of information can be shared with a promoter who is not part of board, when can it be shared or in what way it can be shared. Of course, the laws need to be amended. Q We have seen in the past that independent directors are not very independent. A Throughout the world, independent directors are most dependent and it is restricted not only to India. Some of the independent directors are good and it depends on the personality of independent directors. But SEBI committee is examining all possibilities for independent directors to make them more independent and in future you will see positive results. Let’s wait for the committee report where all these issues should be addressed. Q Have you set any timeline for settling the NSE co-location case? A I can only say that matter is being treated seriously by SEBI. In the end, you will find that the case has been handled well and there will be a clear-cut signal to people that there is a price to pay if you do something wrong. Q Can we say that such matters can be settled through consent mechanism? In my opinion, such matters can be settled though consent mechanism but with a heavy penalty which shows that SEBI is a strong regulator. However, such a philosophy does not exist in our country. Q At the end of a 40-year career, how would you describe your experience as a banker and a regulator? A Handling difficult issues has been my strength and I enjoy being in control. I applied the brakes and accelerator at the right time.​