Lutyens' Delhi took centrestage on Wednesday in the standoff between Mumbai-based markets regulator Securities and Exchange Board of India (Sebi) and Hyderabad-based Insurance Regulatory & Development Authority (Irda).
Finance Secretary Ashok Chawla, in an impromptu chat with reporters, sided with Sebi, while Planning Commission Deputy Chairman Montek Singh Ahluwalia cited the spat to make a case for setting up a Financial Development and Stability Council (FSDC).
Chawla said Sebi's order on Tuesday asking insurance companies not to launch new unit-linked insurance plans (Ulips) was in line with Finance Minister Pranab Mukherjee's direction to maintain status quo ante. He also said the government wanted Sebi and Irda to move court immediately on the contentious issue of regulating Ulips.
"We want them to go to the court at the soonest. The finance minister mentioned status quo ante, which means that whatever prevailed before the date of the Sebi order will continue unhindered. . . That is what Sebi has said," news agency Press Trust of India quoted Chawla as saying.
Irda however believes that status quo ante would mean going back to the stage before Sebi's order of Friday evening banning 14 companies from issuing Ulips. At that time, Irda regulated these plans.
Irda chairman J Hari Narayan and Sebi chairman C B Bhave met finance ministry officials on Monday. Later that day, Finance Minister Pranab Mukherjee made an attempt at truce by recommending "status quo ante".
On Tuesday, however, Sebi asked insurance companies not to issue new Ulips after April 9 without getting registered with it. While Irda maintains that it has jurisdiction over Ulips, Sebi believes these products come under its purview, since they invest in the stock market.
"The larger issue of who has regulatory oversight authority (over Ulips). . . will be decided by the court," said Chawla.
Montek's statement takes the debate to another plane, as it is the first official statement linking the regulatory confrontation to the need for a stability council.
The finance minister, in his Budget speech, had proposed setting up of the council to address "inter-regulatory coordination" issues. The proposal has been opposed by the financial sector as a bod`y already exists for coordination among the regulators.
Attributing the differences between Sebi and Irda to "regulatory gaps", Ahluwalia said that setting up of FSDC could plug these gaps.
He also said that the differences between the regulators had not caused any uncertainty in the market. "This happens all over the world," he told reporters on the sidelines of a function in New Delhi.
Ahluwalia said FSDC would "rework the system to close these (regulatory) gaps".
The ministry of finance is in the process of finalising a discussion paper on the proposed council which will be an inter-regulatory body to improve regulatory coordination and bring about financial stability and international interface.
