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People found it a little difficult to give away powers: UK Sinha

Richa Mishra | Updated on January 10, 2020 Published on January 10, 2020

Hear, hear: Sinha with former prime minister Manmohan Singh, who was the chief architect of SEBI during his stint as finance minister   -  PTI

Former SEBI chairman on his new book ‘Going Public’, FinMins, and work equations

Upendra Kumar Sinha belongs to that rare breed of civil servants who have worked within and outside the government. Not just that, he was also the chairman of the country’s capital market regulator, the Securities and Exchange Board of India (SEBI).

Final post: A 1976 batch IAS officer from the Bihar cadre, Sinha served as the head of SEBI for six years from February 2011   -  PAUL NORONHA

 

How difficult — or easy — was it for him to shift gears? A joint secretary in the capital markets division of the Union finance ministry, he became the chairman and managing director of the Unit Trust of India Asset Management Company (commonly called UTI Mutual Fund). And then there was SEBI.

“I think working in the government and having interactions with SEBI from the vantage point of the capital markets’ division in the ministry was an advantage when I reached SEBI because I was familiar with the sensitivities of the government,” he says.

A 1976 batch Indian Administrative Service officer from the Bihar cadre, Sinha was appointed to SEBI in February 2011 and served as its head for six years — which was remarkable, considering that most others held the post for two or three years. Now leading a retired life in Delhi, Sinha is out with a book called Going Public: My Time at SEBI.

Going Public: My Time At SEBI; UK Sinha; Non-fiction; Penguin/Portfolio; ₹699

 

Chatting with BLink, Sinha dwells on his early days in Bihar and his stints in Delhi — where he dealt with cases such as Sahara (when SEBI and the Lucknow-headquartered business house battled in court over the issuance of bonds) and was part of many significant decisions in the capital markets’ division of the finance ministry. Excerpts:

SEBI was established in 1988 and given statutory powers in January 1992 through the SEBI Act, 1992, when Manmohan Singh was the finance minister. You dealt with finance ministers with contrasting personalities, as well as prime ministers with distinct personalities such as Manmohan Singh (an economist) and Narendra Modi (a political mass leader). How was it dealing with them?

Let me start with Bihar, where I began my career. As the district magistrate of Patna, I saw four chief ministers. Later, when I came to the ministry of finance, I worked with five finance ministers — Yashwant Sinha, Jaswant Singh, P Chidambaram, Pranab Mukherjee and Arun Jaitley. Each had a different style of functioning. But the tenure of each was fully supported by actions.

Yashwant Sinha and Chidambaram went into details, while Jaswant Singh and Pranab Mukherjee looked at macro issues and felt that the bureaucracy should deal with the rest. The approach of Arun Jaitley lay between the two.

Regarding my interactions with the prime ministers, I found that PM Narendra Modi was committed to ensuring that rules were followed and that no irregularity was allowed. He wanted to ensure that the people of the country had the assurance that the financial market rules were followed scrupulously. He was concerned about protecting the interests of small investors and, at the same time, he wanted SEBI to provide a world-class system, so as to attract global institutional investors. He also has this tremendous appetite for knowledge and updates himself with the best of global trends.

Manmohan Singh was proud that he had created SEBI, which was one of his most important achievements as finance minister. He wanted the institution to maintain the highest standards and be counted as one of the best in the world. He also knew the nuances of the market very well. He used to say that we had to maintain the balance between taking strict regulatory action and ensuring the growth of the market. The SEBI Act has three main mandates — regulate the market, develop the market and protect the interest of small investors. He believed that SEBI had to do all three.

In the book you write about the relationship between the government and the regulator. Having experienced both sides in your professional capacity, where do you think the line should be drawn?

I was fortunate to have dealt with the system from both sides — the government and the regulator. I also got the opportunity to work in the industry — I was heading a mutual fund — away from the regulator and government, but watching it very closely, and was also the chairman of AMFI (Association of Mutual Funds in India).

So, to give a fair view of the situation, the government is often held responsible even for acts which it is not directly connected with. But, to the public, the ultimate responsibility falls on the government.

You mean the UTI crisis (when the State-run Unit Trust of India froze redemptions from its flagship fund in 2001)?

In the book I mention UTI, in which the government didn’t own a single share and also didn’t have a nominee on the Board. Also UTI was then not regulated by SEBI.

But when the crisis happened, the matter became very big and then all the blame came on the government.

Another dimension is that in a democratic country people can always approach the government for redressing their grievances. When a complaint is made about anything happening in the country, the government cannot ignore it. But people in the government who have been traditionally exercising certain powers are reluctant to part with these powers even when a regulatory system has undergone a change.

For example, SEBI was created in 1988 through an executive order. But the Act could not be passed till 1992 because certain sections within the government did not want to part with their powers and authority. But when the Harshad Mehta crisis took place [Mehta was accused of being involved in a stock manipulation scheme], the SEBI Act was hurriedly promulgated through an ordinance.

The government often takes the “ordinance route” for decisions seen as reactive...

I have highlighted in the book that more amendments to the SEBI Act have taken place through ordinances than through legislative discussions in Parliament.

The difference between the pre-reforms regulatory system and post-reforms system is that earlier the authorities were working officers of the government — like the controller of capital issue was somebody who also worked as a joint secretary in the government.

In the case of the Forward Market Commission, there was a separate office in Mumbai; but for any action, the approval of the agriculture ministry had to be taken. People found it a little difficult to give away powers and that mentality is guiding us even now. What happened post reforms was that independent regulators were created and they derived their powers from Acts passed by the Parliament.

How can we have an independent regulator then?

The relationship between the government and the regulators has to be managed with mutual respect for the larger interest of the people in the country. Most problems arise when there is lack of respect and understanding for each other. Unfortunately, in India this has been the case.

Is the fight between regulators and the government — SEBI versus corporate affairs ministry or RBI versus finance ministry — more because of red tape or is it political?

I have given two or three examples [of the conflict] in the book. For example, I wrote about how vigilance authorities became overzealous in dealing with matters of regulatory bodies, especially if they are exercising quasi-judicial powers.

SEBI has been created by an Act of Parliament. There is an Act called the Judicial Officers Protection Act and that protection is also available to SEBI officials.

Then there is financial independence. The SEBI Act provides sources of funds for SEBI. SEBI had initially got a loan of ₹200 crore from the government, which it fully refunded with interest. So SEBI is not dependent on the government for its funding.

I remember I had taken the opinion of the then Attorney General about SEBI’s funds and he had said that what had been provided in the SEBI Act and the practice followed by SEBI were right. As such, taking away their funds by the government may result in compromising SEBI’s financial independence.

I believe you had to really cut short your book – constrained by its word limit. So do we see another book happening?

Yes, why not?

Richa Mishra

Published on January 10, 2020
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