In the midst of a turf war between SEBI and IRDA, a global research report has underlined the need for a super-regulator to ensure a smooth coordination between various watchdogs without hurting the markets.
"What is lacking at this point of time in India is a mechanism to ensure proper coordination between the various regulators without harming smooth operation of the financial markets," the report by global consultancy Celent stated.
A critical move in this direction could be the setting up of the Financial Stability and Development Council (FSDC) which the government had proposed in the Budget (2010-11). However, FSDC can perform such a role only if it finds regular backing from the Finance Ministry, the report said.
In April, Finance Minister Pranab Mukherjee had ruled out the possibility of FSDC being a super-regulator.
"It (FSDC) will achieve its mandate without undermining autonomy of regulators. FSDC will be doing only what is not currently being done in the existing set up," Mukherjee said.
The recent turf war between capital market regulator SEBI and insurance regulator IRDA over regulation of unit-linked insurance plans (ULIPs) has highlighted urgent need for clear demarcation of jurisdiction.
It has also underlined lack of clarity in government's policy, because there were contradictions in its statements on the issue, the Celent report stated.
Moreover, the existing High Level Coordination Committee on Capital Markets (HLCC) has also performed a similar role in the past, but it being an informal entity meant that there was a need for greater institutionalisation and accountability.
The report said a solution is needed by maximising synergies available within the system, ensuring a fair playing field for all market participants, including the regulators.
"The frequency and magnitude of the regulatory disputes mean that a workable solution to this issue needs to be found as quickly as possible and political backing for any solution is as crucial as the expertise required to come up with it," Celent senior analyst Anshuman Jaswal said in the report.
The report lays out overlapping domains, for instance between IRDA and the Department of Post (DoP), coming under the Ministry of Communications and IT.
The issue is over DoP's two life insurance schemes -- Postal Life Insurance and Rural Postal life Insurance --, which IRDA is trying to bring under its purview.
Another instance is regarding regulation of the gold exchange-traded funds (ETFs), as commodity market regulator Forward Markets Commission (FMC) has jurisdiction only over goods-based derivatives and not fund-based ones such as ETFs. However, it is also not clear if SEBI has the legal mandate over gold ETFs either.