SEBI strikes

It is not often that a regulator these days is seen punishing a high-profile wrongdoing. Stock market regulator SEBI must be congratulated for its persistent efforts to discipline rogue corporates. Given Mukesh Ambani's financial and political clout, it was not easy to take on Reliance Industries and to slap a Rs 1,000-crore fine and bar it from futures and options trading for one year. Though the SEBI order is open to appeal, action at this stage itself is commendable. It revives the sagging public confidence in statutory institutions. Earlier, the Sahara group, notorious for cheating millions of investors and buying and peddling political influence, was put in its place, first at the SEBI level and then by the Supreme Court. Such cases usually get stuck in appeals and adjournments.

Post liberalisation, there has been a spurt in corporate frauds without a matching rise in convictions. The Harshad Mehta scam of 1992 epitomising financial sector malpractices reflected collective failure of the regulatory oversight mechanism. SEBI has over the years restored some order but this has not stopped scams, which rather have grown in size. According to a CBI estimate, commercial banks alone have reported 1.69 lakh cases of fraud involving Rs 29,910 crore as on March 31, 2013. Barring for a brief period when Raghuram Rajan was at the helm, the RBI has usually allowed banks to hide bad loans or keep under wraps corporate loan write-offs or black money holders. Its failure to come clean during the ‘notebandi’ drive was glaring. 

There are some 60 regulatory bodies at the Central and state levels, including CAG, TRAI, Competition Commission, BCCI, Medical Council of India and the Bar Council of India. Barring a few, most happily play along, overlooking irregularities. They fail to assert their legitimate autonomy. Those at the state level are even worse. No state electricity regulator has ever objected to free power or buying of power at the local level, defeating the objective of open access envisaged in the Electricity Act. This is because key positions in regulatory bodies have become post-retirement perquisites for retiring bureaucrats. This mindset needs to be challenged vigorously.