1. After the turf war between SEBI & IRDA, the Govt. wants to tinker the Regulatory Mechanism in the country and that can deprive the Regulators of their autonomy. Put across your views based on your study and observation of financial market.
The ostensible reason for the ordinance issued by the central Government on June 18 was to end an unseemly dispute between two financial dispute between two financial sector regulators—The SEBI and The IRDA. It is alleged that the Govt. has used the ULIP controversy to effect far reaching changes in India’s financial regulatory set up. The ordinance has been the starting point. To pre-empt the occurrence of such disputes and adjudicate if necessary on future ones, the govt. has proposed a high-level committee comprising all the financial sector regulators and chaired by the Finance Minister. It is this more than any other feature of the ordinance that has become highly controversial.
According to many critics, the government seems to be rearranging the pecking order of financial sector regulators. The RBI, the oldest regulator and also the monetary authority, seems to be placed on a par with other regulators instead of being the pre-eminent regulator, especially in monitoring financial stability. The RBI governor has apparently recorded his opposition and suggested that the ordinance be allowed to lapse.
At a very basic level it is not clear why a new institutional mechanism to adjudicate regulatory disputes is needed. Instances of high-profile disputes such as the one over ULIPs are rare. If they do occur the existing high-level committee presided over by the RBI should be able to tackle them and prevent them from escalating into a major crisis.
An even more substantial criticism is that the government is trying to effect a regulatory capture by undermining the autonomy of the regulators. The fact that the new body will be chaired by the Finance Minister and have the Finance...