Everybody is accountable in a democracy: B N Srikrishna

FSLRC chief defends panel suggestions to overhaul financial system by merging oversight functions of market, commodity, insurance & pension regulators

Financial Sector Reforms Legislation Commission (FSLRC) chairman B N Srikrishna on Thursday strongly defended its recommendations, saying everybody needed to be accountable in a democracy.

"In our country, even the Prime Minister and President can be challenged. So, who are the regulators?" Srikrishna quipped during a panel discussion organised by the Indian Merchants' Chamber here.

According to him, regulators are not accountable in today's set-up. "Which regulator tells us what is the reason behind which he is doing something?" he asked.

The FSLRC report, given to the government in March, called for a total overhaul of the existing financial system by merging the oversight functions of the market, commodity, insurance and pension regulators.

Last week, Reserve Bank of India (RBI) governor D Subbarao had opposed giving statutory powers to the Financial Stability Development Council (FSDC), a key recommendations of FSLRC. "The concern is whether responsibility for financial stability can be given to a committee rather than to an institution," Subbarao had said. According to media reports, the Securities and Exchange Board of India (Sebi), too, had expressed apprehensions on FSLRC's recommendations. Asked about the regulators' concerns, Srikrishna refused to comment and said the report says what it has to say. According to him, having a unified regulator will go a long way in controlling unscrupulous elements in the financial markets and consumers can be better protected.

On being asked if a unified regulator can better check Ponzi schemes such as the ones unearthed in the recent past, such as the Saradha group, Srikrishna said: "Of course, yes. A Ponzi scheme arises because of regulator A saying 'It's not my baby', regulator B saying 'I don't know (and) I'm not concerned with it.' If we had one regulator, we can catch the neck of the person and say this is wrong," he said.

Adding: "We have seen how regulatory gaps have enabled sharks to swim through them. The obvious reason is, if you say that this regulator has this domain jurisdiction, the regulator refuses to look at anything else. In between this, somebody takes advantage and runs away with public money." On how long it will take to implement the FSLRC's suggestions, he said: "It depends on the urgency the government attaches to revamping the financial structure."

According to Srikrishna, the ability to muster sufficient talent would also be a key factor in implementing of FSLRC's recommendations. There is also a need to create awareness among the people to implement the recommendations, he added. The FSLRC chairman admitted the existing regulators fear their powers might be curtailed if the Commission's proposals are accepted. He said this fear needs to be assuaged.