The city-based think-tank, Indian Council for Research on International Economic Relations (Icrier), today suggested that the government should set up a single financial sector regulatory authority to deal with the issues in real time and ward off the adverse impact of the global financial upheaval.
Talking about the lessons India can draw from the ongoing financial crisis, Indian Council for Research on International Economic Relations Director Rajiv Kumar said a single financial regulatory authority would ensure, “...Much more effective and real-time coordination between regulators dealing with different segments of the financial market”.
Currently, different segments such as banking, insurance, stock markets, etc, are regulated by different entities, including the RBI, IRDA and Sebi. Their activities are coordinated by a High-Level Coordination Committee on Finance Markets (HLCCFM).
Kumar further said that there was an urgent need to bring investment banks and hedge funds within the regulatory regime. The assumption that some entities like investment banks and hedge funds should remain outside the regulatory regime must be discarded, he said, adding, “Their actions (greed in most cases) ultimately do create a systemic distress”.
Referring to the other lessons that India can draw from the ongoing financial crisis, Kumar said, “We need to examine the role of the credit rating agencies and identify the weaknesses, including possible conflicts of interest, that they suffer from.”