financing faced problems in adjusting to the changed settlement cycle. While investors were keen to exit such contracts, some of these members refused to honour their settlement dues.
At the time of suspension, NSEL said that it had access to stocks of commodities worth R6,200 crore over and above its settlement guarantee fund (SGF)—a contingency fund created from members’ initial margins that should help it arrest liquidity concerns.
What was NSEL’s proposed settlement solution?
Since it decided to suspended all settlements for a period of 15 days on July 31, 2013, NSEL proposed two settlement plans for the outstanding dues.
After day-long discussions with the producer members along with FMC officials and brokers on August 4, 2013, NSEL proposed its first settlement plan spread over five months. It said that eight of its members agreed to pay their dues of R2,181 crore by due dates or earlier. As per broker estimates these funds were likely to come through by mid-September given the settlement dates of their trades. Another set of 13 members offered to pay 5% of their outstanding every week effectively paying R3,107 crore of their total dues over five months. The delayed payments attracted a 16% penalty as per NSEL. The rest of the outstanding amount pinned at R311 crore is owed by three entities that are still in negotiations with NSEL. The exchange has asserted that members who do not cooperate with the exchange may face FMC action and all possible legal recourse would be taken.
On August 14, 2013, NSEL announced a second settlement plan under the direction of the FMC. The plan included the settlement of R4,200 crore in dues over a period of 20 weeks with each week seeing a payout of R174.72 crore. This would be followed by R86 crore in settlement over the next 10 weeks. NSEL also said that over this 30-week period, the remaining dues of R1,219.71 crore would be settled via sale of commodities, fixed assets and land by some members.
Has NSEL stuck to the settlement plan?
NSEL has partially defaulted on the first three scheduled payouts. It disbursed R92.73 crore as part of the