Room no. 62 is a quiet corner in North Block, home to the ministry of finance. Between June 2002 and October 2005, this room was the office of UK Sinha, then joint secretary (capital markets). Gentle to a fault but firm as steel, it was in this room that I first met Sinha and came out impressed with his deep knowledge of not merely capital markets and its emerging arm, pensions, but their impact on the real economy, real people.
When he moved out of the finance ministry and took early retirement from the IAS to head UTI Mutual Fund, I found the move almost preordained — he had drafted the UTI (Repeal) Act and knew much about the legal innards of the fund. And though he has done well there, his calling was not to head a commercial organisation. Over tea, in his 7th floor office at UTI Towers, I told him that the small fraternity of pension reformers and participants expected him to take charge as the pension regulator. He smiled and said the post of financial regulators is reserved for retired secretaries, not active workers. (M Damodaran, who was a serving IAS secretary-ranked officer when he took charge as SEBI chairman in 2005, had also served as UTI chairman.)
In February 2008, when the indomitable CB Bhave took charge as chairman of SEBI (Securities and Exchange Board of India), Sinha was proved wrong — Bhave was neither a secretary ranked officer nor even a serving IAS officer; he was then chairman of NSDL (National Securities Depository Ltd).
But when Bhave took a stance that investors in unit linked insurance plans (ULIPs) were being systematically cheated and insurers selling the product would need SEBI clearance, cracks developed between Bhave on one side and the Insurance Regulatory and Development Authority and finance ministry on the other. By late 2010 it was clear that Bhave’s term was unlikely to be extended. A more pliable man was needed, a senior official told me.
So, when Sinha’s name was announced informally (it is still to be cleared by the Cabinet), I didn’t believe it as Sinha is anything but pliable. But like it or not, Sinha is going to be the next SEBI chairman and that’s good for capital markets. His regulatory DNA is more aligned with Bhave’s — high on integrity, competence, knowledge, and low on lobbyists, manipulators, fixers. Coincidentally, Sinha had also drafted the SEBI (Amendment) Act, 2002.
If that’s a pattern, his next assignment will be the chairman of Pension Regulatory and Development Authority (PFRDA), a bill he drafted in 2005.
Our last engagement was a mini-skirmish. Sinha was on a podium at a pensions conference and said that unless fund managers get a higher fee they won’t be able to deliver the promise of the new pension system to masses. I asked him, “Why should the nation pay if you bid wrong in an open auction?” (Sinha had bid 0.0009% to manage pension funds, a number that made him the most hated man in the financial sector in February 2009.)
He asked a revealing counter question: “Should we suffer and make the nation suffer because we made a mistake? Or should we move on?” This integrity, even in matters intellectual, is what makes Sinha the person he is — dust off the errors and get going.
Sinha is yet to show that he can bite, an important aspect of being SEBI chairman. But there are enough challenges waiting for him, the first of which is how he will handle the messy issue of MCX wanting to become a stock exchange. Bhave’s view is that the promoter’s stake is too dominant and should not be allowed. We wait for Sinha to take charge and see his stance (the matter is in courts for now).
The other issue that Sinha will have to take head on is that of no loads in mutual funds. As UTI chairman he was uncomfortable with it and much of the industry lobbying took strength from Sinha’s discomfort. But as SEBI chairman will he reverse Bhave’s decision? I don’t think so and certainly don’t hope so.