The Hindu Business Line : IRDA against 'super regulator'

THE Insurance Regulatory and Development Authority (IRDA) has advanced a strong case against the creation of a `super regulator' - one that will cover the three critical areas of banking, securities and insurance - in the context of the on-going pension reforms in India.

If a view is taken in favour of convergence and the formation of a mega supervisory organisation, the regulation of the pension system will get "subserved" in the process, said Mr T.K. Banerjee, member of IRDA. He was addressing the members of the Bengal Chamber of Commerce at a workshop on pension funds.

"If we persist with separate regulators, two issues would arise... whether there should be a separate regulator for pensions and a much broader issue of handling regulatory gaps or overlaps," he said.

As things stand today, the three financial regulators - RBI, SEBI and IRDA - manage the gap and overlap issues through a high-level co-ordination committee.

Besides, there are various other panels which facilitate meetings among the officials of the three agencies.

A new pension regulator, whenever it gets going in a formal manner, will also find representation in the co-ordination committee, it is believed.

The IRDA member, however, simultaneously referred to what has occurred in many advanced nations - convergence of the financial services, a move that has resulted in the formation of a single regulatory agency. The authority also underlined the various dimensions of pension reforms in India. It pointed out that the pension system for Government employees, which is linked to fiscal management, needs to be tackled efficiently. For the vulnerable section, the issue has to be addressed separately.

There is also a need to devise pension systems in sync with the changing dynamics of the labour market.

The other area that needs immediate attention relates to gratuity funds, Mr Banerjee said, adding that the legal framework is in place but there is no mechanism to oversee the adherence of the law.

IRDA is aware that insurance companies have already started to make an impact in managing superannuation and gratuity funds of corporates.

Current regulations allow life insurance outfits to provide fund management and administration services to companies for their superannuation and gratuity funds.

It is believed that the investment pattern mandated for insurers creates an opportunity that corporates can benefit from. On another front, IRDA referred to what Mr Banerjee names as one of the main problems of pension provisions in India. This originates from premature withdrawals, which often results in poverty during old age.

Currently, there is no incentive to compel people to keep their savings till the maturity period. The tax incentives are the same even if withdrawals are made.

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IRDA against 'super regulator'