Appellate tribunals, a good blend of judicial experience and specialised knowledge, are best suited to review regulatory decisions and even perform the role of arbiters between regulators, he feels. This would ensure that regulators remain sufficiently independent of the ministries even as they remain directly accountable to Parliament and subject to its scrutiny, Sinha,who is also chairman of the standing committee on finance, told FE in an interview.
Sinha accused the government of writing a dark chapter into the history of the relationship between the finance minister and RBI, by hurriedly issuing the ordinance on hybrid products regulation and sticking to its plan to convert it into law, despite the RBI governor publicly opposing the move. The government on Tuesday introduced a Bill in Lok Sabha to replace the June 18 ordinance which was issued to break the regulatory impasse that resulted from Sebis move to regulate Ulips.
The Bill not only endorsed unit linked insurance plans (Ulips) as part of life insurance business but also set up a joint committee headed by the finance minister and comprising the four regulators RBI, Sebi, Irda and PFRDA to settle future disputes over regulating such composite financial products. The Bill, of course, was a modified version of the ordinance as it made the RBI governor the vice chairman of the committee instead of being a member similar in status to the other three regulators and also clarified that only the committee members can refer any dispute to it. It also said that the disputes can be referred to only the committee and not the central government also, as the ordinance said.
Sinha, however, thinks that even in the changed form, if the minister is the head, the committee would practically undermine the autonomy of the regulators. The minister functions on the basis of the advice he receives from his officers. So the ministry gets fully involved because the minister is involved.
He recalled how during his tenure as finance minister, a body headed by the finance secretary for hearing appeals against Sebi orders was replaced by the Securities Appellate Tribunal. The decision was taken because, practically, the ministry used to become a party to disputes in the previous set-up.
Sceptical of the proposed laws ability to stand judicial scrutiny, he said, If somebody were to challenge this law, Im not sure, how will the judiciary react; it (the judiciary) could say that this is not proper.
Sinha cited the incident of the apex court invalidating the governments proposal to appoint a non-judicial person as the head of the Competition Commission of India (CCI), a body which was envisaged to have both regulatory and quasi judicial functions. The SC held that the CCI should have two-tier structure a regulator , which can be headed by a bureaucrat duly selected by a panel headed by the nominee of the Chief Justice of India and a quasi-judicial Competition Appellate Tribunal consisting of persons with judicial experience.
It was a bad idea for the finance minister to get involved in settling disputes between regulators, Sinha said, adding that, he was very surprised that even after the (publicly) expressed opposition of the RBI governor,.... who has a stature in the financial sector, the government has decided to convert the ordinance into a legislation instead of allowing it to lapse. The government should keep itself away from the whole process (that are of) the independent regulator and an independent adjudicatory body, he said.
Sinha also accused the government of depriving the parliamentary standing committee of its rightful chance to look at this issue and giving a considered opinion.