IDBI, at one time, was in the RBI's fold. After its apron strings were cut off, IDBI became as independent as ICICI or IFCI, but subject to SEBI regulations in some matters and RBI regulations in some others. There could be a separate regulatory authority for the financial institutions. It is easy to see that regulatory authorities for each segment of the financial sector will not mean the creation of mutually exclusive domains of regulatory jurisdiction.

There will be considerable overlap. Itwill become increasingly difficult to unbundle the overlap should, for example, universal banking catch on. (It is another matter that the customer, say, a corporate, may like to shop for each need--credit, short-term deposit, investment, discount, forex, equity funds, insurance, etc--from different, specialised and competing providers). The plethora of regulators will have to get their act together. They should not come in each other's way or administer what has already been administered by another regulator.

To sort out likely problems, one suggestion is the formation of a club of regulators, a sort of super planning commission with overriding authority. RBI deputy governor YV Reddy has advocated the statutory creation of an apex financial regulatory authority for supervising banking, capital markets and insurance. It will have the RBI governor as chairman. (Is the RBI on an empire-building spree?) Reddy assures that the regulatory jurisdictions of SEBI and IRA-- which has yet to cut its teeth-- will bein tact.

The apex body will only be empowered to assign regulatory gaps to one of the agencies--RBI, SEBI or IRA--arbitrate on regulatory overlaps and ensure regulatory co-ordination. Is not Reddy being hasty in asking for another tier of regulatory authority? Would it not be better to wait for SEBI--and IRA--to identify the overlaps and gaps? By pushing them to accept the RBI's perceptions, the emerging pluralistic balance in regulatory supervision might be skewed.

A co-ordination committee of the regulatory authorities might be a better idea. Above all, there is need for clarity at policy level on how best prudence and competition can be secured through various authorities.