LS passes Bill to replace Ulip Ordinance
The Lok Sabha on Monday passed a Bill to replace the Ulip Ordinance that seeks to set up a joint mechanism to address the issues of jurisdiction between the financial sector watchdogs after the government assured that autonomy of existing sectoral regulators will not be diluted.
The Securities and Insurance Laws (Amendment) and Validation Bill, 2010, provides for setting up a joint body under the chairmanship of the Finance Minister, and with representations from the four financial sector regulators and the Finance Ministry.
The Bill states that the Reserve Bank Governor will be the vice-chairman of the joint committee.
However, there were apprehensions expressed by RBI over its autonomy.
Allaying these fears, Finance Minister Pranab Mukherjee told the Lok Sabha, "it was true there were lots of apprehensions whether we are going to dilute the regulators' independence or autonomy. It will only be in the case of jurisdiction disputes between the regulators that the joint mechanism will be used."
Mukherjee further assured that the joint mechanism will not deal with other areas and only the regulators can refer the matter of jurisdiction to the committee.
Pointing out that the Reserve Bank has two functions- monetary and regulatory- the minister said, "in no way, we are not interfering with the monetary authority. The RBI is the supreme (as far as monetary matters are concerned)."
Mukherjee said in case of regulatory functions too, only disputes will be handled by the committee.
But first efforts would be made to solve these issues bilaterally, he added.
Explaining the rationale for making the RBI Governor the vice-chairman of the proposed committee, he said if the dispute arises between the central bank and other regulators, the arbitrary function cannot be given to the interested party.
"That is why, it has been decided that the Finance Minister will be the chairman," he said, adding the RBI Governor's status has in fact been elevated as the earlier suggestion was to make the Governor only a member of the committee.
The minister further said the government has to interfere, if there is contradiction between the regulators and the overall interests of the economy suffers.
"No regulator comes to Parliament and explains. It is the finance minister who is accountable to Parliament. Therefore, there must be a place where the buck stops and it is the finance minister where the buck stops", Mukherjee said.
The government issued the Ulip Ordinance on 18th June, after the capital markets regulator Sebi and insurance watchdog Irda locked horns over regulation of Unit-linked insurance products (Ulips) and could not seek a joint legal mandate to sort out the issue, as suggested by the Finance Ministry.