The ministry is for status quo in respect of powers enjoyed by the two regulators at present, thereby signalling that the non-convertible debentures and private debt placement should be under the aegis of Sebi. The ministry is in favour of the RBI continuing to retain control over the government securities market because of apparent linkages between the interest rate regime and operations in the government debt market by the central bank. North Block, however, is also not in favour of a demand made by the Sebi-appointed Dhanuka Committee, which had proclaimed that all securities - government and private (and including debtand equity) - should be controlled by the regulator.

The ministry is of the view that such a demand will be unacceptable to the RBI, which also has an important regulatory function in debt market. The finance ministry has been caught in a tight corner in this powerful tussle between the two regulators for supremacy in the capital markets.

The high powered committee - made up of the RBI governor, the finance secretary and the Sebi chairman - has failed to resolve the issue in its last meeting held in Mumbai. Subsequently, a three-member committee has been set up - with a representative each from the RBI, the Sebi and the finance ministry - to resolve the impasse within a limited timeframe. The committee met once and has yet to formalise its decision on the tangle.