The Centre on Wednesday indicated that it would soon put in place the Financial Stability and Development Council (FSDC) to plug the regulatory gaps and loopholes generated recently by the controversy surrounding the Securities and Exchange Board of India (SEBI) the Insurance Regulatory and Development Authority of India (IRDA) over administration of unit linked insurance plans (ULIPs).
Talking to reporters on the sidelines of a function here, Planning Commission Deputy Chairman Montek Singh Ahluwalia said the differences between the two regulators had not caused any uncertainty in the market. “I don't think there is any kind uncertainty in the market. This regulatory dispute happens all over the world,'' he said in response to a question on the ongoing turf war between SEBI and the IRDA.
On the proposed FSDC, Mr. Ahluwalia said it would rework the system to close these regulatory gaps and resolve issues.
Finance Minister Pranab Mukherjee in his budget speech proposed to set up the council to address inter-regulatory coordination issues. The government, however, has yet to finalise the structure of the FSDC. The dispute between SEBI and the IRDA relates to who should regulate the ULIPs.
Describing the issue as ‘complex and legal,' Mr. Ahluwalia said “I think the matter has been resolved. One of the major problems in the financial sector is that different parts of the financial systems have developed in different times, so there are always regulatory gaps.''
Conflicting orders
Following the dispute and conflicting orders by the regulators, the Finance Ministry had stepped in and brokered a peace by persuading the IRDA and SEBI to seek a legally binding agreement from a court and restore status quo ante, the position that prevailed before the issuance of the SEBI order on April 9.
The market regulator in its order had banned 14 life insurance companies, including those belonging to State Bank of India, Tata, ICICI and the Reliance Anil Dhirubhai Ambani Group, from issuing ULIPs.
Within 24 hours, the IRDA directed the insurers to ignore the market regulator order and continue business, forcing the Finance Ministry to intervene in the matter.
