SEBI, IRDA set to surrender fiscal autonomy

The government may soon hold the purse strings of the Securities and Exchange Board of India (SEBI) and the Insurance Regulatory and Development Authority (IRDA).

Going by sources, the two regulators have moved closer to giving up their financial autonomy, ending their long-standing resistance.

The regulators fund themselves out of the various fees that they collect and have a corpus of nearly Rs2,000 crore between them.

The government has taken the view that this money should be merged with its own accounts and that the regulators could receive whatever funding they need from it.

Irda’s recent communication with the Ministry of Finance seems to suggest a willingness to merge its funds once the guidelines are in place. “We are yet to receive any guidelines from the budget division of ministry of finance in regard to IRDA Fund consequent to the decision taken by the ministry of finance regarding the treatment of IRDA Fund and the relevant guidelines for its operation in the Public Account of India,” the insurance regulator said in a letter dated March 28, a copy of which is with DNA.

Sources suggest SEBI too is gearing up for a transfer in its financial reins. SEBI officials manning the administration of these funds have been told of an impending shift in their responsibilities, a person familiar with the matter said.

Both regulators maintain that the issue is under consideration.

However, a SEBI spokesperson did not reply to a query on the issue as he was on leave.

Attempts to reach J Hari Narayan, chairman of IRDA, for more details were not successful.

The apparent caving in of the regulators comes nearly six years after the ministry of finance issued directions in January 2005 to ensure that funds of regulatory bodies are maintained in the Public Account. This did not materialise and the Comptroller and Auditor General of India (CAG) reports for 2008 and 2009 had also highlighted retention of funds by IRDA and SEBI outside the government accounts.

The heads of the regulatory organisations have previously taken the stance that the loss of financial autonomy would affect their ability to act independently.

“If regulators have to depend on the executive for the release of funds, the question of independent behaviour by the regulators will be jeopardised,” former SEBI chairman CB Bhave had said at an industry event a few months ago.

The ministry of finance had said in December 2009 and November 2010 that the broad guidelines, enunciating the arrangement relating to operationalising the SEBI and IRDA Funds in the Public Account had been framed.

A ministry of finance letter received by IRDA in November 2010 and also sent to SEBI spoke of the impending merger. “Based on the advice of the ministry of law... Finance minister has approved crediting the amounts received by SEBI to a ‘Public Account’.

A similar dispensation has been approved in respect of IRDA also,” said the letter. Further details are to be worked out in consultation with the Controller Of Certifying Authorities, Ministry of Finance and the CAG, it said.

As of March 2010, Sebi had surplus funds of Rs1,376.13 crore, while IRDA has around Rs550 crore, as reported by the respective regulators.

The CAG had also pulled up three other regulators —- Pension Fund Regulatory and Development Authority, Central Electricity Regulatory Commission and Petroleum and Natural Gas Regulatory Board —- for maintaining funds outside the government accounts.

The ministry of finance stated in November 2010 that PFRDA had no objection in following the procedures adopted by SEBI and IRDA in respect of their surplus funds.