Moving towards the concept of a super regulator for the financial services sector mooted two years ago, the Reserve Bank of India announced a special monitoring system for 'systemically important financial intermediaries' (SIFIs).
The new classification, coined by the central bank, will include important entities in the banking and insurance industries and the stock markets.
A representative of the Insurance Regulatory and Development Authority will be brought into the current RBI-Securities and Exchange Board of India Technical Committee. The committee will then propose a list of SIFIs and advise on a reporting system in a time-bound manner over the next three months.
The RBI also announced it was considering the recommendations of an informal RBI-Sebi joint working group set up to suggest "methods of (an) integrated system of alerts which would piece together disparate signals from different segments of the market to draw attention to any unusual activity."
Explaining the rationale behind joint-monitoring of SIFIs by the three regulators -- the RBI, the IRDA and Sebi -- the RBI said in its mid-term review of the credit and monetary policy that "with increasing integration of financial markets, restructuring and consolidation in the financial sector, inter-linkages with subsidiaries and the growing overlap of banking and non-banking activities of financial institutions, issues of systemic stability have acquired new dimensions that require a proactive stance so that the gains of financial stability are further strengthened."
The RBI further said, "It has become necessary to set up a monitoring system in respect of SIFIs that could encompass (i) a reporting system for SIFIs on financial matters of common interest to the RBI, Sebi and the IRDA, (ii) the reporting of intra-group transactions of SIFIs; and (iii) the exchange of relevant information among the RBI, Sebi and the IRDA."
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