The country’s most powerful regulators, SEBI and RBI, may soon be left with fewer responsibilities if the government has its way. The finance ministry is thinking of taking away the regulators’ mandate to develop markets so that their regulatory concerns and caution on new products and markets do not come in the way of developing new instruments and markets.  

SEBI and RBI have the twin mandate of market development and regulation, which — at times — are in conflict. The finance ministry believes that though genuine, the regulatory concerns tempt them to suggest unnecessary riders, qualifications and caps that often defeat the purpose of some products and markets.

“Often, the mandate of regulation overwhelms their responsibility to develop markets and stands in the way. There is an urgent need to see if both the responsibilities should remain with a single entity. The government will spend a lot of time deliberating on the issue in the coming days,” a highly-placed finance ministry source told MEDIA.

Unlike SEBI and RBI, the focus on market development figures prominently in the names of the more-recently set up regulators: the Insurance Regulatory & Development Authority and the Pension Fund Regulatory & Development Authority. Experts in financial services say it is important for regulators not to lose sight of the sector’s growth potential.

Ernst & Young national leader (financial services) Ashvin Parekh says, “When market development and regulation are vested with the same body, one of the two can take a back seat, depending on the market situation and the regulator’s perception. When 70% of the working population is outside the banking system, one should recognize that substantial unfinished task is
ahead on market development.

Between monetary policies, overall market regulation and market-making, market-making has received relatively less importance.

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