Industry leaders deliberate at Indian Institute of Management-Lucknow’s annual summit Samvit 2010.
Regulation is necessary to maintain the overall health of a financial system, but over-regulation has the potential to strangle any future growth prospect of the economy.
This summed up the deliberations between bankers and industry leaders on ‘Financial Regulation & Development in India: Challenges & Prospects’ at Samvit 2010 – the annual leadership summit organised at the Indian Institute of Management, Lucknow (IIM-L) today. Business Standard was the print media partner of the event.
The annual leadership summit is the flagship programme of the two-day event, held on November 27 and 28. Samvit 2010 was officially launched on November 13 by Reserve Bank of India (RBI) Deputy Governor, Subir Gokarn.
The industry leaders also suggested the need for the development of corporate debt market in the country to fuel growth, and revisiting and redefining micro-finance.
Initiating the deliberations, former RBI Deputy Governor Amitav Ghosh said regulation was vital to ensuring healthy functioning of different financial players. “By regulation, the central bank expects that the economy is robust enough to absorb adverse financial situations and volatile fluctuations,” he said.
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He suggested self regulation and a mechanism for regular interaction between RBI and the big players in the financial system. “There could be a lead regulator, however, in the present situation there is a dire need for better coordination among different regulators,” Ghosh added.
The regulators in the Indian financial space include RBI, Securities and Exchange Board of India (Sebi), Insurance Regulatory and Development Authority (Irda) and Pension Fund Regulatory & Development Authority (PFRDA).
Recently, there had been a spat between Sebi and Irda over the jurisdiction of regulation of Unit Linked Insurance Plan (Ulip).
DBS Bank General Manager and CEO Sanjeev Bhasin and Wipro Chief Financial Officer (CFO) and Executive Director Suresh Senapaty noted that regulation had to be relevant and contextual to the market and to the economic environment.
“India is rightly regulated and not over-regulated at the moment. However, the risk management skills of the Indian industry should now upgrade to brace for the future,” Senapaty said.
He observed the time was ripe for full convertibility of the Indian rupee and development of a deeper secondary debt market lest India lost out to competition.
“Of the 170 government securities (debt funds), only five to six are actively traded, moreover, of the estimated Rs 50 lakh crore banking funds in India, only about Rs 8,000 crore is active debt fund,” he informed.
KPMG India Executive Director Vikas Vasal said the centre of gravity of the world economic order had shifted from West to East. “While, the recent financial crisis had delayed the full convertibility of the rupee, we are now acting a bit more cautious and are over-regulated, which is uncalled for,” he rued.
He suggested further opening of the Foreign Direct Investment (FDI) route to develop the banking and insurance sectors further.
Ghosh suggested some mechanism of accountability of regulators and said there had been instances where RBI directives had actually created problems.
Oliver Wyman Indian Country Head Atul Khosla and Goldman Sachs CEO Bunty Bohra were the other speakers.