UK Sinha, the mild-mannered chairman of UTI AMC, will be stepping into Sebi Bhavan in February 2011, with the reputation of a man who can solve a problem. Even as the stock market benchmark Sensex looks likely to touch 21,000, the regulator is beset with a host of intractable problems, which call for decisive intervention.
In restoring communication between the Securities and Exchange Board of India (Sebi) and the government, Sinha will have to move fast. Though excellent coordination between the finance ministry and regulators like Sebi and RBI during the depths of the global downturn helped deflect its impact on Indian mutual funds and insurers, friction over various episodes took its toll in 2010.
However, true to his style, even as news spread that the search panel set up by the government to find a new chairman for Sebi had recommended his name to the appointments committee of the Union cabinet, Sinha declined to make any quick comments. Sinha will join Sebi with an advantage: As UTI AMC chairman, he has experienced the impact of mutual fund reforms kicked off by current Sebi chairman CB Bhave. As joint secretary (capital markets) at the finance ministry, he has also seen first-hand the role of the government vis-a-vis the regulators and the role stock exchanges play in checking or precipitating a crisis.
Sinha himself is no stranger to crisis. At the finance ministry, he was tasked with the clean-up when the erstwhile UTI, India’s largest mutual fund ran aground in the stock market scam. He has also steered the reforms in the pension sector, shaping the Pension Fund Regulatory and Development Authority, despite the supporting legislation still pending in Parliament.
Sinha (IAS 1976 batch) will take over as the seventh chairman of Sebi, just weeks before finance minister Pranab Mukherjee presents the Union budget. One can justifiably assume that Sinha will have to brief the minister on the course of the reforms Mukherjee may want to introduce, even before taking formal charge at Sebi.
During his three-year stint at Sebi, Bhave kicked off a clean-up of the mutual fund sector, which is still a work in progress. Many of the funds have been left bleeding as a result. UTI AMC has had a chequered experience in this regard. Not many will now remember that he was also a member of the Percy Mistry committee that submitted a blueprint to develop Mumbai as an international financial centre and more recently, the chairman of the committee on regulations for foreign portfolio investment.
The committee, Sinha had told a newspaper, was aimed at providing transparency in decision-making and making the foreign investment regime more predictable. It would have just two classes of investors?portfolio and those opting for foreign direct investment. Hopefully, these changes by the chairman-designate will be made operational soon to make India a more market-friendly investment destination. He said: ?We are clarifying that wherever there is no separate ceiling on various categories of foreign investment through an Act of Parliament, portfolio investment should be counted over and above the FDI ceiling. Our view is that there need not be a third investor class apart from FDI and FII in the form of foreign venture capital, or NRI, which is cumbersome.?