The country's official auditor, CAG, has pulled up the market regulator, Sebi, for awarding database preparation work to NSDL without competitive bidding and before seeking comments from the stakeholders, resulting in wasteful expenditure of Rs 11.54 crore (Rs 115.4 million).
"Due to award of the MAPIN database work without competitive bidding and without waiting for the feedback from the market participants. . .Securities and Exchange Board of India incurred an unfruitful expenditure of Rs 11.54 crore," the Comptroller and Auditor General of India said in its report tabled in the Parliament on Friday.
On November 20 2003, Sebi had notified setting up of a Central Database of Securities Market Participants and Investors Identification Numbers for the registration of all market participants and investors through allotment of unique identification numbers to them.
It involved collection and maintenance of data in respect of the participants such as demographic details, biometric impressions and digital photographs.
Sebi awarded the work of MAPIN to the National Securities Depository Ltd in May 2003 through a memorandum of understanding without competitive bidding.
As per the MoU, market participants were required to deposit registration fees of Rs 300 each with Sebi, which was to be passed on to NSDL at periodic intervals based on the number of cards issued by it.
Four months after awarding the work to NSDL, Sebi asked the participants for feedback.
"Several representations were received from intermediaries, market participants, companies etc. expressing apprehensions about the database," the report said.
The database was launched in November 2003 and till June 2005, only about three lakh MAPIN UINs had been issued compared to over 70 lakh demat accounts.
Sebi had set up a committee in March 2005 to reexamine the issues relating to MAPIN which concluded that the present system should not be continued due to investors' concerns to fingerprints, multiple IDs, the high cost of obtaining the UINs and the inadequate reach of the system.
In light of these recommendations, in July 2005, Sebi suspended all fresh registrations and the requirement of UIN under the MAPIN regulations and made a total payment of Rs 11.54 crore from the participants to NSDL.
