One swallow does not a summer make. But two swallows? Possibly, especially when it comes to the rarefied sphere of financial sector regulation! We in India do not have a tradition of independent regulators.
So there was little reason to be optimistic about anything changing for the better when the Insurance Regulatory and Development Authority (IRDA) alone objected to the government’s attempt to create a special regulatory dispensation for state-owned Life Insurance Corporation of India (LIC).
But with the capital markets’ regulator, the Securities and Exchange Board of India (Sebi) now joining hands with IRDA and expressing its unhappiness with the government’s effort to tilt the playing field, there is reason to hope the days of pliant regulators might be over.
Of course, we have a long way to go as yet. Part of the reason is that our regulatory bodies are almost invariably headed by retired bureaucrats (usually from the Indian Administrative Service).
Worse, they are appointed by the government, not by an apolitical expert committee or a committee consisting of members drawn from different political parties. So it will be a while before our regulators learn to stand up against government pressure. But let’s not forget that IRDA and Sebi are both headed by former bureaucrats.
Despite that, their Chairmen have spoken out. That is good news, both for the health of the financial sector and for regulatory competence. In this instance, LIC alone among insurance companies is to be exempted from the 10% industry-wide ceiling for investment in a company’s capital and allowed to hold a higher stake of 30%.
The higher limit has, presumably, been driven by the government’s desire to ensure smooth sailing of its disinvestment programme. But the move vitiates prudence and meaningful regulation that calls for a level playing field for all players, private or public.
Selective regulation is not only bad ab initio but can do incalculable harm to the credibility of regulators. Regulators must be allowed a free hand to do what is in the best interests of the sector and the public. Governments that meddle are inviting trouble.
http://economictimes.indiatimes.com/opinion/editorial/it-is-welcome-that-irda-sebi-have-spoken-up-for-autonomy/articleshow/17659366.cms
