CALCUTTA, June 14: Former State Bank of India chairman D N Ghosh today lashed out at the regulatory authorities for failing to come out with consistent policy measures, and suggested "continuous interractions" with market operators for tackling crisis-situations.Ghosh said the knee-jerk reactions of the regulators are evident as, contrary to the global trends of integrating the financial markets, the Securities & Exchange Board of India has initiated moves to compartmentalise merchant banking operations after the CRB fiasco.Speaking at a seminar on `Credit Rating and Capital Market Reforms' organised by the Institute of Chartered Accountants of India, Ghosh said: "At a time when every economy is striving towards achieving intergration of the financial markets, the stock market regulator in India has started preaching the merits of compartmentalisation. The regulators' approach of swinging from one phase to another can have disastrous consequences."The Sebi move seeks to wrongly convey that compartmentalisation helps to reduce fraud, Ghosh said. Ghosh, who is also the chairman of Investment Information & Credit Rating Agency (ICRA), said an effective switch from a regulatory mechanism to a market framework will largely depend on the quality of the market players as well as the regulator."What is most important is that the regulator should have a fundamental commitment to market development," Ghosh observed."The policy makers will not be able to develop good entrepreneurs through `regulatory arrogance' or by fiat. Overzealousness to act will only disturb the development process," he said, adding that operators always manage to stay ahead of the regulators.The market mechanism, said Ghosh, is a much-needed correction of the erstwhile regulatory regime and warrants stressing on the quality of market-development.
