That the ill-conceived, badly-executed June 18 Securities and Insurance Laws (Amendment and Validation) Ordinance, 2010, carrying the stench of conspiracy, is all wrong and must be allowed to lapse or be withdrawn is now a given. Public opinion has mushroomed against this outdated and opaque model of brute governance that has handed over regulatory control to a lax, industry-friendly, anti-consumer Insurance and Regulatory Development Authority (IRDA) over Unit Linked Insurance Plan (ULIP), a badly-structured, badly-incentivised product that Securities and Exchange Board of India (SEBI) sought to bring order to.
But equally, the reason is not the fig leaf of 'regulatory autonomy' that Reserve Bank of India (RBI), needlessly dragged into the ordinance, flagged last week. What autonomy is RBI talking about? The autonomy to protect the profits of banks at worst and prevent them from going under at best — at the cost of consumers? The autonomy that ensures commercial banks do not lend below a specified 'base rate' to corporations but continue to loot consumers with an upwardly-sticky rate to which their home loans are benchmarked — they rush up when interest rates rise and stay put when they fall?
The issue is not even about RBI. Neither of the four financial regulators — RBI, SEBI, IRDA or the upcoming Pension Fund Regulatory and Development Authority (PFRDA) — nor the highly-liberal sprinkling of regulators in areas as diverse as airports or electricity, with more threatening to proliferate. The issue is simple: do we allow our 'independent' and 'autonomous' regulators to run amok with their independence, free to do what they like, irrespective and unrelated to the political economy of India? In other words: who are our 'independent' regulators accountable to?
Don't get me wrong. Regulators — created broadly to ensure that consumers are protected as an economy moves from government charge to private control — need to and must be independent. Without that crucial input, it could well be a government department. But along with this independence comes accountability. To say that regulators are free to do what they want, is putting a little too much faith in the competence and the intent of individuals behind these haloed institutions. If regulatory independence is one arm of an efficient regulator, regulatory accountability is the other.
None of our regulators today is accountable to anyone. All have an administrative ministry, of course. In the case of the four above, it is the Ministry of Finance — so, if it decides to use this brutal ordinance to fix a minor ULIP problem, the ministry is well within its rights, though the decision is wrong. But who is to regulate the implication of their policies or their accounts? The Comptroller and Auditor General of India that is accountable to Parliament has suggested vital amendments in a bill that hopes to end this anomaly. We should see it being introduced in the latter part of the Monsoon Session. In terms of accountability management, I think this is a step forward.
The human implication of 10% growth
Over tea, she told me she was leaving her job and joining another. Somewhat bitter about the way she had been treated, she was still attached to her previous job. “They don't understand the business,” she said with a bite in her voice. “How will they manage it?” I told her that any professional who has three traits has nothing to worry in this era of India's 10 per cent GDP growth — in fact, it is organisations that need to worry. One, you are a little above average in your intelligence. Two, your integrity is above board. And three, you are willing to work hard. That's all you need to negotiate this growth. As for returns, leave it to the market.
She left with a smile.