Public Administration Mains 2017 : Model Question and Answer - 20
Public Administration Mains 2017 : Model Question and Answer
(Public Administration Paper II / Chapter: Significant Issues In Indian Administration)
(Current Based) Question : With the Creation of new regulatory agencies in the wake of liberalization, overlapping jurisdictions and conflicts become the new trend. Is there need for the creation of a Super - regulator or unified regulator? (30 Marks/350 Words)
Model Answer :
The creation of sector –specific independent regulators comes in wake of tendency to address sector specific challenges and to ensure best interest of consumers. The conflicts between these independent regulators mostly due to overlapping jurisdiction. The idea of having a unified financial sector regulator over the medium-term is borrowed from the Raghuram Rajan Committee on financial sector reform.
The Planning Commission in its Draft Regulatory Reform Bill has sought creation of an enabling legislation which will monitor the working of sectoral regulators, maintain convergence in their functioning , make them accountable and at the same time maintains their independence, at times referred to as ‘Super Regulator’
The Financial Sector Legislative Reforms Commission (FSLRC) is right in opting for a single or super regulator to replace those in equity, commodities, pensions and insurance sectors. The idea is to move from sectoral regulation to a broader framework of rules and principles. The proposed clubbing of SEBI, FMC, IRDA and PFRDA is a significant step.
A multiplicity of regulatory agencies has created scope for regulatory arbitrage, apart from making it difficult to protect consumer interest. It has been observed that certain market players try to take advantage of multiple regulators by operating in grey areas not covered by regulation.
The Unified Financial Regulatory Agency (UFRA) will subsume SEBI, IRDA, PFRDA, and FMC. With banks being unique and specialised financial entities, the RBI has been kept out of the purview of the UFRA. The FSLRC has pointed out a number of benefits of the proposed UFRA.
(i) by dealing with all financial transactions other than banking and
payments it would help in realising regulatory economies of scale and scope.
(ii) it would promote efficiency, by providing a common platform, as proposed, for organised financial trading in instruments, spanning equities, bonds, currencies and commodity futures.
(iii) unification of regulation and supervision of financial firms such as mutual funds and insurance companies would yield to consistency in consumer protection and micro-prudential regulation.
The need for a UFRA has been felt in the context of confusion over the jurisdiction of different regulatory agencies over different financial products. (Total Words- 351)
(Linkages : New Regulatory Agencies and Overlapping Jurisdiction, New Regulatory Agencies and Super Regulator, Super Regulator and FSLRC, Super Regulator and UFRA)