Indian
Express: New Delhi: Monday, June 20, 2016.
AFTER having
gone through an eight-month process to choose the next chief of market
regulator Securities and Exchange Board of India (SEBI) that included scrutiny
of at least 50 applications, shortlisting, and even interviews, the Finance
Ministry, in February this year, disregarded all that to give incumbent U K
Sinha another year.
Its argument:
“continuity may be desirable” at times of “excessive volatility mainly due to
external factors”.
Sinha was
originally appointed for three years in 2011, and his term was extended for two
more years till February 17, 2016. He has been given another year now.
Cut to
yesterday. With inflation creeping back, global headwinds including a Brexit
referendum adding uncertainty to monetary policymaking, the government has
decided to let RBI Governor Raghuram Rajan leave Mint Street after his original
three-year contract ends on September 4, 2016.
He, top
government officials said, was willing to stay on, and definitely until the end
of this financial year. This reflected in his Saturday message to RBI staff
where he said he was “open” to seeing through developments relating to monetary
policy committee and the banks’ clean-up.
Consider what
the government did in the case of the SEBI chief. According to an investigation
by The Indian Express under the Right To Information (RTI) Act, the government
received 50 applications for the post as on October 7 last year, 15 or almost
30 per cent of which were from the private sector.
The Financial
Sector Regulatory Appointments Search Committee (FSRASC) chaired by the Cabinet
Secretary met on January 7 to consider the applications. Records show that the
committee noted that it was free to identify and recommend any other person as
well, who had not applied for the post, on merit.
After
scrutinising the applications received, the FSRASC decided to invite seven
persons for a personal interaction on January 21. Sinha was not in the
shortlist of seven.
Of the seven
shortlisted, State Bank of India chairperson Arundhati Bhattacharya was the
only one whose name did not figure in the 50 applications received as on
October 7 last year.
The other six
had applied after the vacancy was circulated among states and the cadre
controlling authorities of the All India Services, and advertised in national
dailies.
These six
were: Ramesh Abhishek (then Secretary, Performance Management); MS Sahoo
(Member, Competition Commission of India); Rajeev Kumar Agarwal (Whole Time
Member, SEBI); Thomas Mathew, Additional Secretary to the President of India;
and two from the private sector, viz., Madhabi Puri Buch, CEO, ICICI
Securities; and Vikram Limaye, MD & CEO, IDFC Ltd.
The FSRASC
was chaired by the Cabinet Secretary and included the Additional Secretary to
the Prime Minister, Economic Affairs Secretary, and three outside experts Rajiv
Kumar (Senior Fellow, Centre for Policy Research), Bimal N Patel (Director and
Professor of Public International Law, Gujarat National Law University) and
Manoj Panda (Director, Institute of Economic Growth).
The committee
had an interaction with the prospective candidates on January 21. The records
of proceedings of this meeting were not available in the file made available
under the RTI. The FSRASC was scheduled to meet on February 1, which was
postponed to February 5, then again to February 8.
Records show
that on February 2, the Finance Ministry moved a note stating that “as
discussed by Hon’ble Finance Minister with Secretary (EA), the process of
selection of new incumbent of SEBI being underway, the term of Shri UK Sinha
may be extended till he attains the age of 65 years or till further orders.”
In the same
file and the same day, Economic Affairs Secretary Shaktikanta Das noted, “It
was agreed that given the excessive volatility mainly due to external factors continuity
may be desirable for SEBI Chairman.” Finance Minister Arun Jaitley, too, signed
on the file the same day.
The
Appointments Committee of the Cabinet approved the reappointment of Sinha on
February 15 with effect from February 18 up to March 1, 2017.
Incidentally,
the market volatility index (VIX which tracks Nifty options) and indicates how
volatile the markets will be over the next 30 days moved to a 4-month high of
around 22 per cent in January from a low of around 10 per cent in December
2015.
While the
volatility index hovered around 25 per cent in the week before Sinha was
granted an extension, it was not the highest level that it had achieved. In the
past, VIX has hit an all-time high of 57 in May 2009 and it had also touched
levels of 39 in May 2014 and 35 in August 2015. However, on February 11, 2016
(days before Sinha’s reappointment) the Nifty fell below 7,000 for the first
time since the Modi government came to power.
If volatility
was a concern for the government to warrant another year to Sinha, it doesn’t
seem to be a factor when it comes to Rajan.
For, news of
his exit comes when markets worldwide are witnessing volatility as they brace
for the Brexit referendum next week VIX that hovered around 15 in the beginning
of June stood at 17.35 on Friday.
Sinha was
initially appointed for three years on February 3, 2011 and his term was
extended for another two years on February 6, 2016. While his term was to end
on February 18, 2016, he was given a little over a year since he had not
attained the age of 65 years.
The rules
state that the SEBI chairman will hold office for such period not exceeding
five years, but will be eligible for reappointment provided that no person
shall hold office after he attains the age of 65.
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