A revolving door for leadership in India's financial sector regulators

With the financial sector maturing, the door to regulatory agencies needs to be opened to a more diverse talent pool

A recurring observation has once again surfaced: The chairpersons of key financial regulators — the Reserve Bank of India (RBI), the Securities and Exchange Board of India (Sebi), and the Insurance Regulatory and Development Authority of India (Irdai) — are all former Indian Administrative Service (IAS) officers. The narrative that often accompanies this fact is one of continuity and a deep-seated understanding of public systems, suggesting that these seasoned public servants are uniquely equipped for the task. The argument is that this is not a coincidence but a reflection of a pragmatic recognition of their skill sets, which extend beyond narrow domain expertise to include strategic thinking, crisis management, and an innate knowledge of how the government machinery works. 

One might look back at the history of these institutions and find evidence to support this view. A long list of former RBI governors —S Venkitaramanan, C Rangarajan, Bimal Jalan, Y V Reddy, and D Subbarao — all came from a civil service or extensive public service background. Similarly, at Sebi, chairmen since 1992 such as G V Ramakrishna, D R Mehta, G N Bajpai, M Damodaran, C B Bhave, and U K Sinha had similar professional origins. The same pattern holds for Irdai, where early leaders like N Rangachary, C S Rao, J Hari Narayan, and T S Vijayan were predominantly civil or public servants. 

It is easy to look at this chronology and conclude that India has successfully developed a cadre of public servants perfectly suited to lead our regulatory bodies. This perspective is, however, dangerously misleading. It confuses the observed reality with a desired outcome. What we are seeing is not the success of a system, but the symptom of its immaturity. The consistent preference for civil servants is not a choice made from an abundance of qualified candidates from all sectors; it is an outcome of institutional weakness that makes it difficult for anyone else to succeed. 

Notwithstanding the periodical problems that bubble up, the ideal-pragmatic model for regulatory leadership, which has been established in successful economies around the world, is based on a “revolving door.” It is not about one type of professional but about a multi-faceted leadership package. The perfect leader for a regulator is someone who has lived and worked in the industry, understanding its practical realities, its incentives, and its vulnerabilities. This person also possesses a rigorous intellectual capacity, perhaps from a background in research or academia, allowing her to think abstractly and rigorously about problems without being confined by the status quo. Finally, she has a deep understanding of public administration, law, and politics, which is essential for steering a quasi-legislative and quasi-judicial body within a democratic framework. 

In India, we have struggled to realise this ideal. The quiet harmony that is often cited as a virtue of civil servant-led regulators is frequently the result of a system that is poorly equipped to handle anything else. We have not laid the correct institutional foundations — the invisible infrastructure — that would allow a non-civil servant to thrive. When external persons have been brought in, they have often “tripped up” because the regulatory organisations are not governed by transparent formal processes and the rule of law. They are instead often reliant on informal networks, unwritten customs, and a deep-seated knowledge of government functioning that only a lifelong public servant can possess. 

This is a profound handicap. The knowledge and perspective from the two other worlds — industry and research organisations — are not luxuries; they are necessities for modern, effective regulation. Industry professionals bring an unparalleled understanding of market practice, innovation, and risk. Researchers bring a critical, evidence-based mindset and the intellectual firepower to address emerging challenges, from complex financial instruments to the regulation of new technologies.  A system that cannot safely and sensibly incorporate these experts into its highest leadership ranks is a system that is fundamentally incomplete. 

The solution to this problem is not to romanticise the current state of affairs or to settle for the status quo. The solution is to build better, more resilient institutions. We must recreate the environment that allowed exceptional individuals like Manmohan Singh, C Rangarajan, Bimal Jalan, Vijay Kelkar and M S Ahluwalia to join government at mid-senior levels and flourish, often while retaining their professional strengths and academic networks. 

These leaders were not simply products of a single system; they were part of a community of experts who could navigate the complex waters of government, academia, international institutions, and markets with remarkable professional ability. Though most of them came from institutions abroad, they did not parachute into the top levels of the agencies, rather they grew in the Indian public system and understood its nuances and complexities while moving up. 

This is where institutional reform becomes critical. The path forward lies in improving the maturity of regulatory organisations and grounding their functioning in the rule of law. The work of the Financial Sector Legislative Reforms Commission (FSLRC) holds the essence of this change. The draft Indian Financial Code, while a blueprint for financial regulation, contains 140 sections of law that could be applied to any regulator, not just those in finance. These provisions are designed to establish a new level of clarity about the working of these organisations. They aim to replace reliance on informal networks and personal connections with a framework of formal, rule-based processes. 

This institutional reform is not just about who leads our regulators, it is a vital part of India’s broader growth journey. A modern economy cannot be built on an opaque and personality-driven administrative state. It requires a system where decisions are predictable, processes are transparent, and accountability is clear. By implementing the kind of reforms suggested by the FSLRC, we can create regulatory institutions that are robust enough to welcome leadership from all three crucial sectors — industry, research, and public administration. This will enable us to move beyond the illusion of stability provided by a single cadre of professionals and build a genuinely sophisticated and effective regulatory leadership that India needs to prosper in a globalised world. 

The author is an honorary senior fellow at the Isaac Centre for Public Policy, and a former civil servant