Capital Market Regulation in India: Turf Wars Inevitable?

by Anshuman Jaswal, PhD, May 5, 2010
Industry Trends
Asia-Pacific

Abstract

Recent events related to Unit-Linked Insurance Plans (ULIPs) in India have highlighted the need for a mechanism that ensures proper coordination between the various financial market regulators without hampering the smooth operation of the markets.

In a new report, Capital Market Regulation in India: Turf Wars Inevitable?, Celent analyzes the role of various regulators in the Indian financial markets across banking, capital markets, insurance, pension funds, and commodities. The report looks at the various recent overlaps of jurisdiction and discusses possible ways in which these can be minimized, if not avoided altogether.

In India, regulators for the capital markets (1992), insurance (1999), and pension funds (2003) have all come into being in the past two decades and are operating in fast-growing markets. This has resulted in a lack of clarity regarding the domains of the various regulators. The PFRDA Act (relating to pension funds) and FCRA Amendment Bill (for the commodities market) have been on the back burner for some time because there has not been sufficient political will to tackle these important issues. This has led to an uneven playing field, with some regulators having powers required to regulate their respective markets and others waiting for a proper mandate to do so.

“The frequency and magnitude of the regulatory disputes mean that a workable solution to this issue needs to be found as quickly as possible, and political backing for any solution is as crucial as the expertise required to come up with it,” says Anshuman Jaswal, Celent Senior Analyst and author of the report.

The report looks at the recent regulatory developments in some of the leading global capital markets such as the US, the European Union, and the UK, besides other geographies. All of these markets have seen a lot of regulatory changes due to the recent credit crisis. The report also makes recommendations in areas such as improving coordination between regulators without having a super-regulator, use of fast-track courts to ensure quick resolution of conflicts, ensuring a level playing field between regulators, developing a consensus-building approach within the various sections of the financial markets, and finally harmonizing regulations across markets.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

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Michele Pace
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Europe (London)
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Table of Contents

Executive Summary

3

Introduction

5

Overview

7

Financial Market Regulators in India

14

 

Securities and Exchange Board of India (SEBI)

14

 

Reserve Bank of India (RBI)

15

 

Insurance Regulatory and Development Authority (IRDA)

16

 

Pension Fund Regulatory and Development Authority (PFRDA)

17

 

Forward Markets Commission (FMC)

17

Global Capital Markets Regulation

19

Possible Improvements

22

Conclusion

25

Leveraging Celent’s Expertise

26

 

Support for Financial Institutions

26

 

Support for Vendors

26

Related Celent Research

27

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