RBI to handle ICICI, Sebi to monitor Tatas

Possible systematic risks in the financial sector has forced the three regulators, the Reserve Bank of India (RBI), the Securities & Exchange Board of India (Sebi) and the Insurance Regulatory and Development Authority (Irda), to divide the responsibility as to which financial conglomerates would come under their fold.

The RBI would be the lead regulator for the ICICI group, while Sebi for Tatas and Irda will regulate the Life Insurance Corporation of India (LIC).

"Major financial conglomerates are being looked into. We look at companies under our purview and in the event of any issue, we pass it on to the lead regulator for that particular conglomerate," said C S Rao, chairman, Irds.

He was speaking on the sidelines of Munich Re's one-day seminar on financial risk management here in Mumbai.

In the inaugural address, Rao said that as the market is getting more integrated among financial conglomerates, "there is a heightened need for transparency, disclosure and corporate governance."

This is especially important in view of safeguarding policyholders' interests. Financial conglomerates having exposure to various financial segments such as banking, mutual funds and insurance could bring about an adverse impact on one business on account of another.

"Hence we need to look at risks not just within the organisation, but also the conglomerate so as to ensure that such situations do not arise," said Rao.

Recently the RBI put residuary non-banking company, Sahara India Financial Corporation under the scanner when it appointed accounting firm KPMG to check up on the company's investments. Sahara also has interest in the life insurance sector, said Rao.

Irda will be the lead regulator of LIC's subsidiaries, be it the mutual fund arm, LIC Asset Management Company, or its housing finance arm, LIC Housing Finance Ltd.

Likewise, should Irda or any regulator have any issues with ICICI group concerns, RBI would be asked to look into the matter.

Similarly, in the case of Tata AIG's two insurance ventures, the insurance regulator would refer the matter to Sebi as the investment made has been undertaken through Tata's financial arms.