The Financial Sector Legislative Reforms Commission sees regulators resorting to ‘turf protection’ to keep at bay the creation of a ‘unified regulator’.
This could be one of the obstacles coming in the way of the FSLRC’s plans to recommend a unified regulatory agency for the sector.
“We know there will be turf protection. There will be a chorus against our decision (for a unified regulator). That is why we have brought an approach paper so that we also know what their reaction is,” said Justice (retd) B.N.Srikrishna, who heads the FSLRC.
In presentations made to the panel, each regulator is understood to have submitted that the sector overseen was “peculiar” and others would not be able to handle it.
“We have to take a call on this. If there is legitimacy in their fear, we have to address it. If the fear is on account of possible loss of turf, then we don’t need to address it,” Srikrishna said here on Thursday.
The approach paper, released on Monday, recommended that regulatory bodies such as SEBI, Forward Markets Commission, Insurance Regulatory and Development Authority and PFRDA should get subsumed into a new unified regulatory agency. Simply put, these will cease to exist if the proposal were to be enacted into law.
The approach paper has, however, recommended that Reserve Bank of India should not be brought under the ‘unified regulator’ until enough experience has been gained.
Srikrishna said “We are suggesting what is good for India in the next 25-30 years. Our model should stand the test of time. We should be able to move with the velocity with which rest of the world is moving”.
Unique to india
A unified agency will help avoid issues of overlap and arbitrage, he added.
D Swarup, FSLRC Member and former PFRDA Chairman, said that a proposed ‘unified regulator’ was unique to India. The commission studied various models before deciding on this approach, he added.
In the current framework, there is a possibility that each regulator will keep his hands off until some major problem arises. “Let there even be some kind of a conglomerate product. Nevertheless, it will be regulated by somebody in the larger interest of public. You won’t have a situation where a regulator takes his hands off,” Srikrishna said.
The panel, set up in March 2011, will submit its report in March next.