Newsletter September 2026
Dear Friends,
Greetings from the Centre for Regulatory Governance.
When buildings,
bridges, and even mountains are crashing all around us (the lucky ones) and
over some (the unlucky ones), thoughts become emotional. The easiest outburst
blames corruption and cronyism as the reasons for the vast tragedies.
I would instead point
to a much clearer way to enforce better outcomes. The example I would draw upon
is that of the stock markets and the regulator, the Securities and Exchange
Board of India. Rarely did any pair of years pass in the nineties and the early
noughties when there wasn’t a stock market crash or a scam.
The band of brothers
at the exchanges (rarely sisters) would be continuously tapping into some fount
of liquidity to prop up some shares and then see those come crashing down, once
the spigot ran dry. It was often as deadly as the crashes of today in terms of
the money lost by the bewildered retail investors.
How did this interminable chain come to an
end? Simply by Sebi learning to align the incentives and the punishment in a
straightforward manner. The broker or the sub-broker learnt that he could make
more money by keeping to the straight and letting the markets do the rest. It
took time for the investors to renew their confidence in the markets, but it
did and how! In the current round of sustained outflow of foreign investments
from the Indian markets, retail investors have pumped in money big time, which
has become the subject of several case studies. The markets have soared and it
is possibly the only corner of the Indian financial markets where the returns
have persisted. Of course, in INR terms. But in other more guarded corners like
bank deposits even this has not happened.
What did Sebi do? It was not one step, but
a series of steps, each of which brought in technology for more market
surveillance, room for faster turnaround of market transactions, and so
lowering of the cost of each transaction to absurdly low levels. The results
show that regulatory foresight works. Remember, there was no example from
abroad to make this a simple copy-paste act, but it was a case of crossing the
river by gingerly stepping across it, feeling the stones and the current of
water.
Each chairman of Sebi
insisted that their orders should act as a precedent to guide the action of
future investors and market makers.
This is a lesson not learnt by the other
regulators. For instance, in 2024, one of the newest in the game, the National
Financial Reporting Authority, passed a strict set of orders against the
alleged wrongdoings by the auditors of the Cafe Coffee Day chain. VG
Siddhartha, the CEO of the chain, committed suicide in 2019, and a set of a
inter regulatory examination of the company was triggered. NFRA, rightly,
examined the role of the auditors, but its weapon was a report filed by a
senior CBI official. Now, by any stretch of evidence, the CBI is not a
technical specialist in financial crimes; the NFRA should be. Yet the roles
were reversed. Studying the order, one finds no guidance from the regulator for
nipping such crimes in the future and therefore a study for the auditors in
their business.
So, we only have the
assurance that if a crime is committed, the regulator would prosecute the
auditor. But is that enough to stop the crime, or, in the case of buildings,
prevent them from collapsing? The auditor or the broker has to only know how to
suppress the bad news. This is what the public is asking now. Is the regulator
supposed to be only a prosecutor, a role that is often done better by the state
and its agencies, the armed forces? Or should the regulator play a proactive
role to ensure buildings are built to specifications, or the bridges have the
lifespan they are supposed to have? A legislature cannot have such an
understanding, which is why they delegate the examination to the regulator. The
regulator cannot copy the role of the state as a quasi-court and pass orders.
We do not need them in the first place.
The course correction
by the brokers is a fine example in this context. Mountains may not be stopped
from sliding, but houses could certainly be built more safely.
With Regards
Subhomoy Bhattacharjee
During August 2026, 3
significant events in the Regulatory space highlighted India’s strategic
macro-shift towards incorporating a private-led, sustainable and independent
infrastructure across Nuclear Power, Energy and AI.
AERB: Nuclear and Space sector: In a bold move, the
Indian Government made 1 more step towards liberating the Nuclear Power sector from the Government
stranglehold, while making sure that there was no loosening of its grip on some
critical strategic operations, necessary for India’s security. While the
Regulatory body Atomic Energy Regulatory Board (AERB) gets more powers to act
independently, it marked an important step for India to achieve 100 GW of
nuclear capacity by 2047. This important development could well have a
spill-over effect on the Indian Space technology sector also. Lots more
development could be expected in this sector in coming months.
AI (and Digital
Infrastructure): As Lok Sabha passes
Bill to grant the Government the power to introduce fees on select UPI and electronic payment transactions,
recognizing the fact that Banks and payment service providers need a
financially sustainable model to operate, a suggestion treating Artificial
Intelligence as India’s next Digital Public Infrastructure (DPI) invited
intense discussions among the CRG panellists with experts, faculty and students
putting forth their opinion on the same.
CERC: Moving ahead with more proposed reforms in the
Power sector, the CERC, needing to handle growing solar power capacity, and
controlling wastage of electricity, while keeping price uniform nationally, the
regulator proposed Market Coupling, managed by a single operator.
However, there are regulatory issues that need to be addressed – and these have
been discussed in detail.
News on Regulators like FSSAI, PFRDA,
CCI, and Marine Industry, were covered in our Latest News section.
The detailed reports and discussions by our CRG panellists analyzing the reports are captured in our website: https://crg.jgu.edu.in/.
