Finance Minister Pranab Mukherjee sought to soothe the frayed nerves of India's financial regulators by saying the government would not undermine their autonomy.
Mukherjee's assurance came a day after Reserve Bank of India Governor D Subbarao went public with his 'concerns' over dilution of the central bank's role in dealing with inter-regulatory disputes in the Ordinance issued last month.
The Ordinance followed a turf war between the insurance and stock market regulators over control of unit-linked insurance plans.
Speaking to reporters on the sidelines of an event organised by UTI Mutual Fund, Mukherjee said, "I would like to remove the confusion that it (the Ordinance) is going to interfere with the autonomy of the regulators in their respective areas. We are not going to interfere."
Mukherjee, however, declined to comment on whether the government would allow the Ordinance to lapse, but gave enough indications that the language of the Ordinance will be suitably altered to ensure that only financial products strictly falling between two regulators will be examined by a statutory committee.
"The joint mechanism will interfere only when there is a conflict between two regulators on hybrid jurisdictions," Mukherjee said.
The government had last month promulgated the Securities and Insurance Laws (Amendment and Validation) Ordinance, 2010.
The Ordinance seeks to set up a Joint Committee, headed by the finance minister, with the financial sector regulators and ministry officials as members, to resolve disputes like the one between the insurance and stock market regulators.
The ordinance will automatically lapse--an unlikely scenario--if the government does not bring in a Bill to this effect in the monsoon session of the Parliament. In such a case, the existing High Level Coordination Committee on Financial Markets, headed by the Reserve Bank of India governor, will remain the nodal authority for coordination among regulators.
Ordinances are promulgated when Parliament is not in session. They need to be ratified by Parliament within a stipulated time.
RBI had requested the finance ministry to let the Securities and Insurance Laws Ordinance to lapse. Subbarao had told reporters in New Delhi on Monday that he met the finance minister in connection with the Ordinance and that RBI had certain reservations and concerns.
Mukherjee's assurance on Tuesday means the government will not undermine RBI's mandate under the RBI Act to frame the policies for and to regulate transactions in all kinds of financial derivatives, along with money market instruments and securities.
Image: Pranab Mukherjee. | Photograph: Dipak Chakraborty
