Co-op banks, audit firms and HFCs: All victims of ineffective supervision

Gaps in the regulatory system exist because the body tasked with overseeing them is toothless, or there is confusion about who oversees certain firms, or regulators simply don't exist in some cases

The liquidity crisis in housing finance companies, the spate of resignations by audit firms who fear being banned, and a diktat by the Uttar Pradesh government looking to merge all co-operative banks that it controls.

These seemingly unconnected events taking place in India’s financial sector ecosystem have something in common. They are all the result of gaps in the regulatory system, either because the body supposed to be overseeing them is toothless, or there is confusion about who oversees certain firms, or because in some cases, regulators simply don’t exist.

Crumbling co-op banks

Take the case of Uttar Pradesh, where