A significant announcement in the budget pertaining to the financial sector is that about setting up a new apex body to strengthen and institutionalise the mechanism for maintaining financial stability. The Financial Stability and Development Council, as it will be called, will monitor macro prudential supervision of the economy, including the functioning of large conglomerates, and address inter-regulatory concerns.




Earlier attempts to create such a body did not fructify for various reasons. It was felt that a “super regulator” would not preserve the autonomy of individual regulators, such as the RBI, SEBI and the IRDA. However, there has been considerable vagueness about the functions of financial regulators, as evidenced by certain recent, well publicised cases. For instance, it is not clear whether SEBI or the RBI will supervise the recently introduced interest rate futures. There is ambiguity over the popular unit-linked insurance schemes, with both SEBI and the IRDA claiming jurisdiction. Instances such as these will only increase, as financial innovation will bring in relatively complex products that combine the features of capital market instruments and banking and insurance products.

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