The regulatory mechanism put in place by the government
recently to address the disputes arising between
the regulators has obviously raised concerns among the
financial regulators. The angst felt, particularly by the RBI, at
the government's promulgation of Securities and Insurance
Laws (Amendment and Validation) Ordinance, is quite
understandable for, the ordinance takes away from the RBI its
perceived position of `first-among-equals'. Indeed, it may
even snatch away the very autonomy of RBI by virtue of
replacing the existing mechanism of resolving the disputes
between regulators by the High Level Coordination Committee on
financial markets chaired by the Governor of RBI with a
Joint Committee chaired by the Finance Minister.
So, there emerges an apprehension among many
including the RBI that the ordinance is essentially meant for letting
the Finance Ministry have the final say on the Central Bank.
There is, of course, an understandable reason behind it: Quite often,
it is noticed that the RBI has refused to tow the government's line of thinking in catering to
its short-term political interest, though it fell
in line with the government subsequently, having essentially no formal independence.
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