Year 2013 will go down in history as one in which many regulatory loopholes were exposed, prompting regulators to take action to plug them. The RBI stole the thunder from the SEBI as it was the central bank’s actions that had a decisive impact on the currency and the economy.

The year also saw many long-pending Bills finally becoming law, bringing cheer to consumers and companies.

Ponzi schemes Regulators had to sit up and take notice after gullible investors lost their life-savings in scams, such as Saradha scam. Market regulator SEBI brought out the collective investment scheme regulation to cover all schemes that collect more than Rs 100 crore. The idea was to bring all esoteric Ponzi schemes involving investing in emus, goats and potatoes, among other on under regulatory purview. But this can only be called the first step since schemes that collect less than Rs 100 crore and those covered by various state laws will still slip through the net.

The effort to bring the real estate sector under regulatory purview is, however, likely to meet with more success following passage of the Real Estate (Regulation and Development) Bill, which will create a regulator for the property sector, similar to the ones in insurance and telecom.

No foot-dragging In a break with the apathy of yester years, various Bills that have been pending for years saw the light of day. The Companies Bill, which was originally introduced in 2009 and then again in 2011, was passed this year. The Bill has various provisions to protect the interests of retail shareholders, including the right-to-file class action suit. The companies were, however, up in arms against the provision for mandatory CSR expenditure.

Rusty regulations were also updated to be in tune with the times.

In some cases, such as the Land Acquisition Act, the original law dates back to the 19th century. The updated Bill establishes new rules for acquisition and also sets compensation as high as four times the market value in rural areas.

Also, the drug price control order, created 18 years ago to include 75 medicines, was replaced by the new Drug (Prices Control) Order 2013. The change will lower the prices of 348 essential medicines that are under the National List of Essential Medicines.

Stricter rules Not just new regulations, the year also saw many existing rules being tightened in order to provide regulators greater powers to enforce them. For instance, companies undertaking clinical trials now have to pay the treatment expenses for any ailment suffered by trial subjects. Similarly, the Insurance Regulatory and Development Authority introduced changes to mandate health insurance providers to offer lifetime renewal, greatly benefiting senior citizens.

Companies that did not meet the minimum 25 per cent shareholding rule were taken to task by SEBI. The regulator also switched to periodic call auction mechanism for trading in illiquid stocks, to reduce market abuse in these stocks.

Overzealous

Since it was believed that speculation and the unsatiable demand for gold from Indians was behind the rupee’s woeful performance, in mid-year 2013, the RBI made some rapid-fire policy changes to address the issues concerning gold.

Changes included restrictions on gold imports and gold loans and limiting funds transfer abroad.

Restrictions were imposed on banks trading in both inter-bank as well as exchange-traded currency market and margins in currency futures were hiked to contain speculation.

Some of RBI’s moves, such as directing banks to stop early disbursal of home loans to unwary home-buyers lured by the 80:20 offers, were aimed at protecting consumers.

Similarly, the RBI instructed banks to stop offering zero interest EMI schemes on credit cards for purchase of consumer goods.

The year ahead

The stability in the rupee and the current account deficit will determine the at what pace at which the RBI rolls back the restrictions it has placed on currency trading, gold imports and fund transfers abroad, among others.

The spot-light will remain on the commodity market regulator, FMC, following the NSEL fiasco. New rules for spot trading in commodities can be expected. SEBI might take further action to tackle the challenges posed by algorithmic trading. The event of the year, the elections to the Lok Sabha set for mid-year 2014, will determine whether the pending Bbills, including the one on hiking foreign direct investment in retail, will pass muster.

>meera.siva@thehindu.co.in

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