The Bharatiya Janata Party on Monday said it is concerned over dilution of RBI's autonomy with the passage of a Bill that seeks to create a joint mechanism for resolution of disputes between different financial regulators.
Initiating a discussion on the Securities and Insurance Laws (Amendment and Validation) Bill, 2010, Piyush Goyal (BJP) said the proposed joint mechanism "compromises the autonomy of the regulators".
He also questioned the joint regulation of hybrid financial products like the unit linked insurance plans. Goyal said under the joint mechanism, the RBI Governor too would be called for the meetings for dispute resolution between regulators which has never happened in the past.
The RBI chief always had a one-on-one meeting with the Finance Minister. He said the entire case of jurisdiction problems between two regulators could have been managed better and there was no need for an Ordinance earlier and now a Bill.
Asking the government to reconsider the Bill, Goyal said there are apprehensions that a "super regulator" would be created. "If the issue has not been solved amicably before it reaches the Committee, will it not vitiate the atmosphere," the BJP member asked.
Goyal said it was a "surprise" to see the way the Ordinance was rushed through "without application of mind" and demanded that the Bill be referred to the Standing Committee.
He also criticised the functioning of insurance companies saying they were "eating" into the money of the policy holders through certain schemes.
Goyal said more than 80 per cent of the ULIP policies expire in the first 3-4 years of the term and these companies were benefiting at the expense of the government as there was a tax rebate on purchasing the policies.
"A study should be carried out on how much money the insurance companies earn on surrendered policies," he said.
Introducing the Bill, Finance Minister Pranab Mukherjee said there are four regulators at present and of them three are statutory regulators. Giving the background of the Ordinance brought earlier and now the Bill, Mukherjee said this was due to problems between the SEBI and the insurance regulator regarding jurisdiction on ULIPs.
He said members of the joint mechanism comprise all four regulators - RBI, SEBI, IRDA and PFRDA. Mukherjee allayed the apprehensions that a super regulator would be created saying the Finance Ministry had "no such intention".
The government had issued an Ordinance on June 19 to solve the dispute over the jurisdiction on ULIPs between stock market regulator SEBI and the Insurance regulator IRDA.
