Damodaran flays SEBI-FMC merger, idea of super regulator

Former Sebi chairman M Damodaran today criticised the move to set up a super regulator for all financial sectors and said what is needed instead is more freedom and autonomy for the regulators.

"I don't think, a unified regulatory idea ... is fit for us. Britain already experimented it. I am not in favour of such a super regulatory body for the financial sector and I am not in favour of any unified regulator," the former Sebi chief said.

He further said that he was unhappy when the pensions fund regulator PFRDA was created saying "the insurance regulator IRDA could have done the job."

"I am not in favour of some of these sweeping changes in the name of modernity," he added.

Damodaran was talking to media on the sidelines of the 97th Foundation Day of New India Assurance here this evening.

"We need regulations to protect weak from the strong. It is a level playing ground. The Sebi was set up to develop the markets to protect investors," he said.

To a query, he said, "we need autonomous regulators including financially. We can't live with conflicts of interest."

He also criticised the merger of the FMC with the Sebi, saying "FMC has been merged with Sebi, but will Sebi be able to manage it as the two are different animals."

However, he supported the creation of a public debt management agency saying the job should be shifted from the RBI to the government.

"The RBI should not be wearing too many hats. There should be a debt management committee and which must be given to the government and the RBI should not do too much of actions on behalf of the government," he said.

On independent directors, he said, "We thought they will look after interest of investors. But later we realised that it was not the case to be. Sometimes you put in place regulations with good intentions. But it is likely to be bad," Damodaran said.

He also opposed bringing in force a host of new laws in place of the existing regulations, saying "You need better regulations not new regulations. You need to enforce existing regulations. You must have an advance ruling authority."

Advocating a simple regulatory environment, he said, "a regulator is not the policeman. He is not a protagonist in a boxing ring. A regulatory environment should be simple."

On mutual fund body AMFI, he said if it wants to be a self-regulator then it has to do away with industry lobbying.

He also criticised the government for saying it will not interfere in the functioning of state-owned banks but will intervene in some cases. "If so what is the difference," he said.