The government today introduced a bill in the Lok Sabha that provides for a joint mechanism headed by the Finance Minister to resolve differences among the financial regulators - SEBI, IRDA, RBI and PFRDA.
The Bill - the Securities and Insurance Laws (Amendment) and Validation, Bill 2010 - addresses concerns by Reserve Bank of India (RBI) over its autonomy, by including its Governor as Vice-Chairman of the joint commission instead of making him just a member.
The bill replaces the ordinance of June 18 which had brought within jurisdiction of IRDA the power to regulate “life insurance business” that may include hybrid insurance products like Unit Linked Insurance Policy (ULIPs).
The ordinance had treated RBI at par with other regulators leading its Governor D. Subbarao to express reservation saying this would dilute the authority of the central bank.
Stock Market and Insurance regulators SEBI and IRDA were at loggerheads over the jurisdiction of hybrid insurance products like ULIPs with both claiming their authority over these popular schemes.
Since ULIPs comprise insurance policy as also the mutual fund, SEBI had issued an order in April this year asserting its authority over the scheme. However, this was not acceptable to insurance regulator IRDA.
In the midst of deadlock, the government came out with an ordinance giving the jurisdiction to IRDA.
It had also proposed a joint commission comprising the Finance Minister as Chairperson and RBI Governor as Vice Chairman, Secretary in the Department of Economic Affairs, Secretary (Financial Services) and the heads of stock market, insurance, banking and pension fund regulators - SEBI, IRDA, RBI and PFRDA - as members.
Making another deviation from the ordinance, the bill proposes that in case of any differences among the regulators, the reference shall be made to the joint commission only by the respective regulators and not by the government.
“As both Houses of Parliament were not in session and immediate action was required to be taken, the President promulgated the Securities and Insurance Laws (Amendment and Validation) Ordinance, 2010 on the 18th June, 2010” to resolve differences between two regulators, SEBI and IRDA, Finance Minister Pranab Mukherjee said while introducing the Bill.