Just like the Securities Appellate Tribunal (SAT), which was set up to hear and dispose of appeals against orders passed by the market regulator Securities and Exchange Board of India (SEBI), it is time to create an appellate tribunal for the Reserve Bank of India (RBI) to make the banking regulator accountable and its decisions more transparent, said former Supreme Court Justice BN Srikrishna on Friday.

He was speaking at the BusinessLine Knowledge Series webinar on ‘Is the long arm of the regulator hurting the markets?’. The webinar, powered by BSE, was moderated by Palak Shah, Senior Assistant Editor, BusinessLine .

“In case of SEBI, the appellate tribunal has rapped the market regulator so many times it at least anticipates some kind of reversal of its orders when the matter goes to SAT,” Srikrishna said, adding, “but there is no way of accounting for a decision taken by the RBI as a regulator.”


Justice Srikrishna, who chaired the Financial Sector Legislative Reforms Commission (FSLRC), said, “You can’t challenge the RBI’s decision. Even if you challenge it on the constitutionality in courts, the judge will say we can’t interfere in constitutional jurisdiction because it (RBI) is an expert body. This is the problem.”

“As long as there is transparency in your methodology when you are working in the public domain then you will have greater faith,” he added.

Commenting on the role of regulators, Sandeep Parekh, founder of Finsec Law Advisors said the handholding aspect has been ignored by SEBI or any other regulators.

‘Not doing enough’

“Indian regulators never see development as a key role but think that regulations by itself will lead to development. Are regulators doing enough to enhance regulation and competition? The answer is a clear ‘no’,” Parekh added.

However, he also added that currently SEBI is dominated by too many committees and a lot of the issues that people complain about are actually introduced by the industry so some complaints should go to the industry as well.

Siddharth Shah, Senior Partner, Khaitan & Co, agreed that SEBI has become far more consultative than it was earlier.

“As far as SEBI is concerned, we have seen a significant improvement in terms of policy making and consultation, and the mindset change to involve industry in policy making has definitely happened,” Shah said, adding “Principle-based regulation required now is not necessarily prescriptive.”

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Ashish Kumar Chauhan, Managing Director and CEO, BSE said that every market participant blames the regulator it is an amorphous entity which cannot come and defend for itself at every occasion.

“All over the world they have graded application of law. If you are a larger investor, you get lesser protection and if you are a smaller investor, you get higher protection. But in India, we have it mixed up so that the largest guys take the biggest risk and then want themselves to be protected like smaller guys,” Chauhan said.

The panel delved deep into all aspects of regulations. The discussion, at times heated, called upon the regulators to frame rules not keeping the worst offenders in mind. By doing so, they would be suffocating the markets and hurting their development.


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