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A wrong move
The Government is considering a separate regulator for non-banking financecompanies (NBFCs). This appears to be a fallout, albeit belated, of theunseemly tussle which had developed between the RBI and Sebi over theresponsibility for the CRB fiasco. The problem was sorted out, with the RBItaking over as regulator. It now seems that arrangement was only temporary,and a separate regulator is envisaged. The Government seems to feel NBFCsare in a class by themselves, and important enough to warrant a separateregulator. The question is, why stop at NBFCs? Surely, corporate depositsare also very important from the point of view of the small investor -- doesit call for a separate regulator as well? There could well be as manyregulators as financial activities. The irony is with banks getting intoconsumer finance, NBFCs are passing through an identity crisis. TheGovernment too seems to be confused about their role.The point is, there is a convergence taking place in the financial sector,with banks, financial institutions, mutual funds, and even insurancecompanies all planning to muscle in on each other's hitherto sacrosanctterritories. With the Internet becoming an increasingly important vehiclefor delivery, even software companies (Intuit, for example) are offeringfinancial products, on the premise that these are nothing but informationproducts. It is only a matter of time before these changes witnessed in theadvanced countries find their way into India. Under these circumstances,where there is a convergence of activities, there should also be aconvergence of regulators. The UK and Japan have already put in place aone-stop regulatory system that enables them to deal with the new financialmarketplace. A separate regulator for NBFCs will be a step in the wrongdirection. Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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