Regulation needs altering as economy is evolving: Arun Jaitley

“I think for any regulatory mechanism the stakeholder consultation has to be of very high quality, that will probably lead to a revisiting of the traditional thoughts and opinions and that’s why if you have seen several regulators now publish their approach papers, tentative drafts, they hold hearings, meet individuals, meet groups of stakeholders together and improve upon what’s being said,” he said.

Jaitley added that if regulators in general adopt this approach, “now that we are evolving as an economy, where all regulation needs to be relaxed or needs to be altered depending on the ground situation, I think this would be quite useful in the whole process”.

Reserve Bank of India Deputy Governor Viral Acharya had said on Friday that governments that do not respect the central bank’s independence would sooner or later incur the wrath of financial markets, citing the examples of economic turbulence in Argentina and Turkey.

Read | Deputy Governor speaks up: Undermine RBI autonomy, face markets’ wrath, ignite economic fire

The finance minister on Saturday further said the Insolvency and Bankruptcy Code (IBC) is helping the banking sector in cleaning up bad loans. The fear of IBC has made defaulters approach their bank and clear their dues, he said.

“The unintended consequence (of IBC) was that potential defaulters started realising that the moment you cross the red line, at least you will go out and never get back,” he said.

“And if you have seen the last quarter or two, potential defaulters are begging, borrowing and stealing and paying back. And that’s why the banks have started getting monies even outside the NCLT (National Company Law Tribunal) system from potential defaulters not wanting to cross the red line,” he added.

Commenting on strengthening regulatory mechanism in the country, Jaitley said: “My impression is that governments increasingly get an opportunity to interact with various stakeholders. And governments have to make themselves accessible to stake holders. They can’t be indifferent. Governments per se, as elected governments in a parliamentary democracy are highly accountable. You are accountable almost every minute to the media, you are accountable to Parliament, with frequent elections you are accountable to the people, you are also accountable to various stakeholders because you have to listen to them and react accordingly. And that is actually a very useful interaction which emerges out of these accountability norms.”

He added: “It makes you wiser, it takes you beyond the domain of traditional theories, dogmatic opinions or even what is stated in a file or in an expert paper. It gives you the empirical evidence of what’s going on . So if you were to meet the bankers, the businesses, the others who are in that business of dealing with finance, money or currency, the empirical evidence is inherently more sound. Because you can discount for some forms of exaggeration which at times stakeholders say about the challenges they face. But that’s important.”