The Securities and Exchange Board of India (SEBI) and the Insurance Regulatory and Development Authority (IRDA) disregarded the Finance Minister’s suggestion to “jointly seek a binding legal mandate from an appropriate High Court” on which body had jurisdiction over Unit Linked Insurance Plans (ULIPs). That is why the Government had to issue an Ordinance on the ULIPs issue. This was stated by the Finance Minister, Mr Pranab Mukherjee, in the Lok Sabha on Monday.
The House later passed the Securities and Insurance Laws (Amendment and Validation) Bill, 2010 that seeks to replace the ULIPs Ordinance issued in June 2010. The Ordinance had provided for a Joint Committee to resolve the disputes on jurisdiction over hybrid products among financial regulators — the RBI, SEBI, the IRDA and the PFRDA.
Mr Mukherjee told the Lok Sabha that this Joint Committee will not be a super regulatory body. He also endorsed the Raghuram Rajan Committee’s recommendation that it was premature for India to have a single regulator.
The Finance Minister made it clear that only the financial sector regulators can refer matters to the Joint Committee and that the Bill had changed the earlier position in the Ordinance of allowing the Finance Ministry to refer matters to the Committee.
“Only the financial regulators can now refer matter to the Joint Committee on disputes in respect of hybrid products,” he said, adding that this reference could happen when the high-level committee on capital markets (HLCCM) process fails for hybrid products.
Mr Mukherjee also said that the proposed law, replacing the ULIPs Ordinance, will not interfere in the autonomy of financial regulators.
On the Reserve Bank of India, Mr Mukherjee said that the central bank will come under the purview of the joint committee by virtue of it being regulator of banks and not as a monetary authority.
He pointed out that the RBI currently has two main roles — as the monetary authority and as regulator of banks.
