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Letting Rajan go: Govt scrapped search, cited volatile markets to extend SEBI chief term

Records show on Feb 2, FinMin moved a note stating that as discussed by Finance Minister with Secretary, the process of selection of new incumbent of SEBI being underway, the term of Sinha may be extended till he attains the age of 65 yrs.

Written by P Vaidyanathan Iyer , Sandeep Singh | New Delhi |
Updated: June 20, 2016 8:43:59 pm
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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.

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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.

WATCH VIDEO: RBI Governor Raghuram Rajan Delivers The First RNG Lecture



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.


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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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First published on: 20-06-2016 at 04:44:29 am

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