Mis-selling: from impressions to evidence

by Renuka Sane.

Retail finance in India is once again in the news for reasons of fraud, this time in the form of the Saradha Group in West Bengal. There is a general sense that such schemes proliferate because of the failure of financial inclusion, and that better supervision by current regulators will bring us back on track. The problems of mis-selling however, are not confined to the unregulated chit-fund industry. For many years now, problems of consumer protection have been gathering prominence. While there is concern about the collision between hard-driving financial firms and the average unsophisticated investor, it has been over-ridden with the argument that the problems are minor, sporadic and over-stated by a sensationalist media.

Evidence on mis-selling

There may not be consensus in policy circles on the pervasiveness of mis-selling, but the incipient academic literature on the problems of consumer protection in household financial choice in India reflects otherwise. The following papers are of note:

• Anagol and Kim (2010) study a 22 month period in which closed-end mutual funds were allowed to charge an arguably shrouded amortized fee whereas open-end funds were forced to charge standard entry loads. They find that inflows into the more expensive funds were much higher, and that investors paid approximately 500 million dollars in extra fees in this period.
  
• Sane and Thomas (2013) discuss the failure of consumer protection in the micro-finance crisis in Andhra Pradesh in 2010.
  
• Anagol, Cole and Sarkar (2013) conduct audit studies of insurance agents. They find that insurance agents overwhelmingly recommend products which provide high commissions to the agent and are unsuitable for the customers. This is exacerbated for customers who appear to be less financially literate.
  
• Halan, Sane and Thomas (2013) study the lapsation in insurance policies after the introduction of unit-linked insurance plans (ULIPs) and find that investors lost more than a trillion rupees from mis-selling over the 2005-2012 period. This shows us that while chit funds are a problem in India, (regulated) ULIPs have imposed bigger losses upon households than (unregulated) chit funds.

These papers offer hard evidence about the problems of consumer protection across products and income-groups and establish that the magnitudes of money involved are substantial. It is not easy to now argue that the problems are sporadic and small and of second-order importance.

Weak regulation

These problems have not taken place in an environment of unregulated finance. The regulation in India is product oriented, focuses on form and not function, and places great emphasis on prudential regulation. While protection of customer interests is a key part of the mandate of all regulators, there is no framework on how to bring this about. Each regulator has its own procedures for licensing and registration of intermediaries, expected code of conduct, caps on commissions, grievance redress procedures. The focus is on inputs, and checking the correct boxes, and not on outcomes. This often leads to instances of regulatory arbitrage, or leaves open the possibility that several entities slip through the cracks and get regulated by no one regulator. The system does not clearly identify the rights of the customer, or place responsibility of outcomes on the distributor. There is no basic definition of whether a product is suitable for a specific customer and no standard to which distributors can be held responsible for what they sell. Once investors get duped into signing consent forms, redress seems unlikely. The evidence that the current redress systems are effective in providing relief to customers is also very weak.

Early regulatory responses

The response from Indian regulators has been in the form of policy changes that should prevent mis-selling that has been seen in the past decade. The key milestones are:

• Ban on entry loads on mutual funds , SEBI, August 2009
  
• Cap on ULIP commissions, IRDA, October 2009
  
• Order on regulation of ULIPs, pointing out that ULIPs are inherently fund management products, SEBI, April 2010
  
• Changes in ULIP product rules, including surrender charges, IRDA, September 2010
  
• New rules for NBFC-MFIs for lending in micro-finance, RBI, July 2012.
  
• Regulations on investment advice, SEBI, January 2013.

Each of these initiatives is an incremental response by a regulatory agency that became uncomfortable with the status quo. However, they do not add up to a comprehensive and internally consistent strategy for consumer protection, and they are not adequately rooted in law. One regulator has banned commissions for a product, while similar products are permitted to charge commissions under a different regulator. Various distributors such as banks come under far less scrutiny on distribution because they fall under a different banking regulator. SEBI regulations on investment advisors do not apply to agents who provide advice solely on one financial product. This implies that the existing network of agents, including banks, can continue to function in the current framework which does not require agents to act in a fiduciary capacity towards their clients.

Considering the low financial literacy and low access to finance in India, perhaps it is also not advisable to require each agent to have a fiduciary responsibility. There is a strong case to be made for simple products that may be sold without the imposition of high suitability standards. However, no such provision exists in the current regulations. The micro-finance regulations focus predominantly on prudential regulation, even when the problems in the sector arose on issues of customer protection. There is also no understanding of whether the measures imposed have brought about the desired change. A framework for evaluation of the costs and benefits of various regulatory interventions is completely missing from the current regulatory discourse in India, and the response so far has continued to ignore its importance.

The Indian Financial Code will yield transformative change

The Indian Financial Code (IFC) is an important landmark in financial regulation in that it identifies customer protection as a central goal of regulation. The draft law enshrines the customer with rights to prevent mis-selling at the time of sale, and provides for a redress system after an event has occurred. In the IFC, the consumer has a right to get fair disclosure and suitable advice from financial service providers. This recognises that the market for financial products is an uneven playing ground with customers not being in a position to evaluate financial products, especially over long horizons. The code also requires the regulator to undertake measures to promote financial awareness.

The IFC has appreciated the possibility that excessive regulation may have its costs which ultimately get borne by the customer. It has put in place several checks to ensure that regulation is not stifling the market, including that of continuous evaluation of outcomes brought about by policy. Section 54, of Chapter 13 specifies that the financial agency is required to measures the costs and benefits of regulations by using the best available data and the best scientific method when such data is available. There are important connections between the incipient literature on household finance in India, and the requirements for analysis that are embedded in the IFC.

Addressing ponzi schemes: the three parts of the solution strategy

There is a great deal of moral outrage about ponzi schemes. Parliament is being asked to "do something!". We have seen this movie in India before. Laws are enacted as a knee-jerk response to an event. Quick and dirty responses are poorly thought through, which perpetuates the cycle of underperformance in public administration [example: IRDA/SEBI ordinance, example: MFI bill; example: Lok Pal Bill;].

Laws are the DNA of government, and the drafting of laws should be done with extreme care. The drafting of law should:

• Be rooted in adequate technical expertise from four fields: in the subject matter, in public administration, in law and in public economics.
• Reflect diverse viewpoints and interests
• Be rooted in a consultative process
• Reflect an understanding of international experience
• Be forged out of a sophisticated debate about alternative design choices.

All too often, in India, we rush in to offer a legislative response while cutting corners on these six requirements.

In the field of finance, the process of policy reform began with a committee process from 2005 to 2011 which mapped out the big ideas for policy reform through a series of expert committee reports. This led up to the establishment of the Financial Sector Legislative Reforms Commission (FSLRC) which worked for two years. A cast of 146 participated in the work of FSLRC, which has drafted the Indian Financial Code. In addition, hundreds of people participated in the committee process that led up to FSLRC. If this full process of policy analysis, from 2005 to 2013, had not been undertaken, the solutions at hand would be a lot inferior.

With this knowledge in hand, it is possible to isolate the three elements of dealing with ponzi schemes, which are in the three blog posts that I just put up on this blog:

1. The first issue is the question of jurisdiction: Is X a regulated activity and who is the regulator in charge? (By Smriti Parsheera and Suyash Rai).
2. The second issue is about regulatory strategy, and the Indian Financial Code has three elements that would impinge on ponzi schemes: micro-prudential regulation, resolution and consumer protection. (By Suyash Rai and Smriti Parsheera). The approach is, of course, more general and applies to all savings/investment schemes. But it's interesting and important to understand how this approach addresses the immediate problem that we face today.
3. The third issue is that of the investigation and enforcement process, where certain maladies have afflicted existing approaches. (By Shubho Roy).

Also see The law that can kill ponzis, once and for all by K. P. Krishnan, Smriti Parsheera and Suyash Rai in the Economic Times.

Investigating ponzi schemes: A malady

by Shubho Roy.

What has happened?

SEBI was investigating Saradha for more than 3 years before the deposit schemes of the company collapsed (See here). Saradha seems to have used two methods to delay the investigation:

1. When SEBI asserted its authority to stop Saradha group from collecting money, Saradha challenged the jurisdiction of SEBI in district courts. It quickly got orders to prevent SEBI interfering in its businesses. These orders were eventually overturned by the High Court.
   
2. When SEBI requested information from Saradha about their schemes and investors, Saradha responded by providing large volumes of documentation without specifically answering SEBI's questions. This slowed down the entire investigation.

Why is this a problem?

In those three years Saradha took on new depositors and collected money from existing ones. All this money is now lost. Two years of investigation were required to stop what seems to be a run of the mill ponzi scheme. The tactics employed by Saradha are not new. They are similar to those employed by Sahara in delaying investigations in the OFCD schemes and in many other white collar crime investigations. The disturbing fact is that they seem to succeed time and again. While SEBI has wide powers of entities registered with it, if someone does not register with SEBI, the system of enforcement of laws changes completely. The current system requires SEBI to approach the local courts for prosecuting violations of the SEBI Act which constitute an offence. Moreover, SEBI cannot directly appoint lawyers for prosecuting the offences and must rely on the state government prosecution machinery to get criminal prosecution started.

The source of these difficulties

The present system suffers from a number of weaknesses, two of the most important are:

1. The normal court systems do not have the time or expertise to enforce violations of investment and securities laws. This leads to confusing orders which sometimes exceed the jurisdiction of the courts. Even in the case of Saradha, the High Court set aside the orders preventing SEBI from exercising its powers over Saradha, noting that the courts were out of jurisdiction when they prohibited SEBI. However, High Court orders take time, and in this time period the operator of the ponzi scheme can continue to collect money or misappropriate the money already deposited. Expertise in deciding jurisdiction and applicability of SEBI laws is also not available in most normal district courts. It will be extremely expensive and wasteful to train all district judges in securities laws for the once-in-a-decade case in financial laws.
   
2. The use of state public prosecutors for violations of financial laws is problematic for two reasons. First, the normal public prosecutors office is flooded with normal criminal cases like theft, murder, etc. A complex financial law case will never be the priority of the normal public prosecutors office. Second, the average public prosecutor who is extremely busy with the daily load of run of the mill criminal cases is not trained investment and securities laws. Just like district judges, it is not cost effective to train all public prosecutors in securities laws.

How would this work under the IFC?

The Indian Financial Code, drafted by the Financial Sector Legislative Commission, addresses these issues in the following ways:

1. The whole system of investigation is formalised under an investigator appointed by the regulator. The terms of reference for the investigator, the system of investigation and the time for investigation has to be written down at the onset. Since all incomplete investigations will require extensions, there will be system of raising alarms for an unusually long investigation. See draft clause 394 of the IFC.
   
2. The code allows the investigator to apply for a warrant for the search and seizure of documents. The investigator does not have to go to the area where the scheme is operating. He can apply for a warrant with the magistrate where the head office of the regulator is situated. This allows the government to create a special magistrate's office. This magistrate can be trained in issues of finance and fraud and be a proper judicial check for warrants. See draft clause 396 of the IFC.
   
3. The code also allows the financial agency to make an order preventing transfer of any money or assets pending an investigation if there is a reasonable fear that the assets of clients are at risk. Any violation of such orders is also punishable by imprisonment up to five years. See draft clause 398 of the IFC.
   
4. The code empowers the central government to set up special courts to try cases involving the violation of investment laws. This allows for far quicker and more efficient disposal of cases. These courts will be district courts and follow all due process of law required under the Evidence Act and the Criminal Procedure Code. However, unlike general criminal courts, judges in these courts can be experts in securities and investment laws. See draft clause 417 of the IFC.
   
5. Finally the code envisages that the financial sector regulator appoints its own lawyers to prosecute cases of criminal offences. These lawyers will have the same powers as a prosecuting lawyer under the criminal procedure law. Since most financial regulators have legal officers on staff today, this allows specialised expertise to head the prosecution of these crimes rather than a generalist public prosecutor.
   

The strategy used in the IFC is similar to that used in securities laws in the U.S., where dedicated federal court benches are used to prosecute securities frauds. Even in India, special courts and prosecutors have been created for the CBI and for prosecution of offences under the Prevention of Corruption Act. The longer a ponzi scheme lingers the more victims it accumulates. The Indian Financial Code provides a system to effectively shut down schemes like these and a specialised criminal law system to prosecute violators.

The loss of critical savings by many have raised demands for retribution. A hurried response to such demands can bring in laws which dilutes the principle of `innocent until proved guilty' or reduce the procedural and evidentiary standards. The Code scrupulously avoids this by placing the power of issuing warrants and convicting offences on the same standards as envisaged in the laws of evidence and criminal procedure. However, it addresses the problems of a slow judicial system and dedicated expertise in resolving financial crimes.

Regulatory strategy for savings/investment schemes, that would address ponzi schemes

by Suyash Rai and Smriti Parsheera

The first task in dealing with ponzi schemes is correctly defining the scope of financial regulation. Once a firm is classified as a financial service provider, the appropriate regulator must choose a regulatory strategy for it. Assuming SEBI had clear jurisdiction with Sahara or MMM, what would SEBI do?

Safety and soundness regulation (also called micro-prudential regulation) is an expensive form of regulation, which includes requirements relating to maintenance of capital, investment restrictions, corporate governance, risk management systems, etc. This type of regulation can not apply equally to every financial institution. For example, the regulator should be able to distinguish between small member-controlled chit funds and larger chit funds.

Differences also need to be drawn based on the nature of the activity being carried out. Micro-prudential regulation should be less stringent for investment schemes as compared to deposit-takers, given the difference in the nature of promises being made to consumers. However, at the very least, the scheme would require authorisation from the regulator. In the MMM India example, had the scheme sought such approval, its promoters would have to satisfy basic fit and proper person requirements. Given that the scheme has been floated by Sergey Mavrodi, a convicted fraudster and the man behind Russia's largest Ponzi scheme, it is likely that the scheme would have failed on this count.

This points to the need for a sophisticated approach to ensure optimal regulation. The law should allow the regulators to apply safety and soundness regulation wherever required, but the decision can't be left to the regulators unconditionally. The law must provide some guidance to them, to make them accountable. What could be the form of this guidance?

Consider the following examples:

• A bank with Rs. 10,000 crores of deposits from 1 crore depositors.
  
• A local chit fund with Rs. 10,000 from 20 members.
  
• A chit fund with Rs. 1000 crores from 1 crore members.
  
• A hedge fund investing Rs. 1,000 crores, from 50 investors.
  
• A mutual fund investing 10,000 crores, from 1 crore investors.
  

Where should safety and soundness regulation apply, and what should be the intensity of the regulation? A closer look reveals a few distinctions on four dimensions.

The bank and the large chit fund are more opaque than the others - most of the important information about their asset quality is not visible. That is why we are often taken aback when they fail. In small chit funds, people have reasonable visibility, since the money is with one of the members and is distributed regularly. Hedge funds and mutual funds are also quite easy to monitor, as long as they report fairly, because they invest in securities that visible in the market on a real time basis.

Bank and the chit funds make promises that are inherently more difficult to fulfill - they must return money, irrespective of their financial position. Banks more so, because the deposits are callable at par. Hedge funds and mutual funds invest on behalf of investors, with no guaranteed rate of return and so the market risk stays with the investors. Institutions making promises inherently more difficult to fulfill are at a greater risk of failing to keep the promises.

There is a difference in the influence the consumers can wield over the institution. In a small chit fund, members have significant influence over each other. In game theory terms, they are in a repeated game over a long horizon - small amounts are saved over short periods, and this is repeated. When a few people become managers of funds for a large number of people, the moral hazard problem increases exponentially, and the consumers' ability to influence the institution drops. Similar difference can be seen in the hedge fund (small number of high value investors), and the mutual fund (large number of small value investors).

The institutions differ in terms of consequences of their failure. If a bank or a chit fund fails, many poor and middle class people lose their savings and many suffer significant hardships. We are seeing this in Saradha's case.

Each of these four distinctions is relevant for deciding where safety and soundness regulation should apply. They can be stated in terms of principles, but do not translate into a set of ex-ante rules in terms of institution-types. If the law states them in terms of rules, it may be gamed. The principles, therefore, must be in the law.

Section 151(1) of the Indian Financial Code provides four principles-based tests, based on the four distinctions discussed above, that will help the regulators decide where and to what extent safety and soundness regulation should apply. The regulators will use a combination of these principles to take the decision. For example, it is not enough that the promise is inherently more difficult to fulfill, the institution should score high on some other tests as well. From the five examples listed earlier, the bank and the large chit fund will be intensely regulated for safety and soundness, and the mutual fund would attract some regulation to ensure that it is acting prudently and reporting fairly. The small chit fund and the hedge fund may be largely exempt.

Handling failure

Even among the licensed and regulated deposit-taking institutions, some will become weak. In such situations, there are ways of stemming the decline, and if the institution fails, minimising the loss to depositors. Dealing with failure requires a sound resolution and deposit insurance system. Deposit insurance covers deposits, upto a limit, against the risk of failure of the institution.

At present, banks in India are covered by a deposit insurance system, which, as demonstrated by the experience of many urban cooperative banks, often takes a long time to settle claims. Bank-like institutions, such as deposit-taking NBFCs, are not covered by deposit insurance. Countries like US and Canada have elaborate systems of resolution, which may include sale of the firm, management through a bridge institution, and temporary public ownership. The agencies responsible for resolution are also empowered to take corrective action if a firm's soundness declines. In India, there is no system for resolving failing firms, and no structured framework for corrective action.

Part VII of the IFC provides for a resolution corporation, which will provide deposit insurance to certain institutions, take corrective actions on firms becoming weak and resolve institutions before they become insolvent, by arranging a sale of the firm, managing it through a bridge institution, or facilitating temporary public ownership. Section 260 enables extension of deposit insurance to institutions taking deposits. The regulators, in consultation with the resolution corporation, will decide which institutions will be covered by deposit insurance. This decision will be taken based on tests like the ones proposed for deciding where safety and soundness regulation will apply.

Enhanced consumer protection

The operators of the MMM scheme claim to make full disclosures to their members about the uncertainty of returns and the risk to their funds. But is mere disclosure sufficient to absolve Ponzi scheme operators from all liability? Certainly not. While disclosure and transparency requirements are integral components of an effective consumer protection regime, research shows that when faced with complex financial decisions, consumers often suffer from cognitive biases which can result in sub-optimal decision making.

It is for this reason that IFC contains additional protections when retail consumers are advised on financial products. This is in the form of suitability assessment requirements that compel the managers and distributors of financial products to assess the relevant personal circumstances of individual scheme members and the suitability of the product for their purposes before advising them to join such schemes.

Correctly defining the scope of financial regulation so as to block ponzi schemes

by Smriti Parsheera and Suyash Rai.

Attack of the ponzi schemes

The Saradha Group has gained notoriety in recent weeks with outstanding public deposits reportedly exceeding Rs.200 billion. There was anger and panic. The state government has stepped in with partial redress.

As we watch this saga unfold, there may be another crisis waiting to happen in the form of a pyramid scheme offered by `Mavrodi Mondial Moneybox (MMM)' that is taking rural India by storm. MMM claims to be a `social financial network' in which members voluntarily share money with each other by buying and selling MAVROS - a currency-like unit devised by the operators of the scheme. MMM claims to generate returns of over 40% per month, although the returns are not guaranteed. It may be a ponzi scheme: one where money collected from new investors is used to pay returns to old investors. The cycle will continue till inflows into the scheme exceed outflows.

Saradha and MMM are not isolated examples. Other recent schemes have involved promises of unrealistic returns from investments in goats, pigs, emu, teak wood and potatoes.

The history of savings and investments in India is replete with tragedies where financial firms fail to return deposits or investments. This is particularly problematic in a country where 70% of the people earn under 2 dollars a day and hence have small amounts of money saved up. If savings are not safe, the central objective of regulation - consumer protection - is not met. What we need is for institutions that take deposits or run investment schemes to operate in a safe and sound manner, within the bounds of financial regulation.

Under-regulation

Under the present system there are many institutions that offer deposit or investment services without any form of approval or regulation. Under a fragmented regulatory system, hazy lines of work have been drawn between financial regulators, the Central Government and State Governments. This has led to the problem of under policing - anything that does not fall squarely within the lines tends to pass unnoticed from under the radar of regulation. Saradha presents a good example - its activities could be argued to fall under any of the following categories: running a collective investment scheme (regulated by SEBI); running a chit fund (regulated by the state government); a private company taking deposits for its business (regulated by the Registrar of Companies); and taking public deposits as a non-banking financial company (regulated by RBI). The Saradha Group chose to seek permission from none of these.

There is also inconsistency in the manner and extent of regulation of financial institutions performing similar activities. For instance, 265 non-banking financial companies and 18 housing finance companies are allowed to take public deposits, but they don't enjoy the same deposit insurance protection that is available to banks. If the main rationale for deposit insurance is to protect depositors from the risk of a financial institution becoming unable to make good on its promise to refund public deposits, should the same logic not apply to all deposit takers?

Chit funds, which are governed by State governments, also suffer from the problem of inconsistent treatment. Differences in enforcement levels across States have resulted in some States becoming more prone to ponzi schemes. In addition, most this sector may be operating in the form of unregistered chit funds: it is estimated that registered chit funds have collected Rs.300 billion worth of deposits while the collection of unregistered funds is much higher at Rs.30 trillion.

The regulation of collective investment schemes that come under SEBI's scanner has also left much to be desired. This is largely on account of the restrictive mandate. Section 11AA of the SEBI Act defines "collective investment schemes" in terms of principles to identify such schemes, but it contains exemptions for institutions such as chit funds, nidhis and cooperative societies. Pointing to the huge investment grey market that plagues the financial sector, the SEBI chairman U. K. Sinha observed that the loopholes in the existing laws are the primary cause for the situation. He pointed out the need for a single regulatory body to look into the regulation of all companies that take illegal deposits from the public.

Eliminating the threat of ponzi schemes: The sound answer

The draft Indian Financial Code (IFC) framed by the Financial Sector Legislative Reforms Commission (FSLRC) presents a comprehensive solution to address the problems of under-regulation. The FSLRC has recommended a clearer and more comprehensive regulatory architecture as compared to what we currently have - RBI would regulate banking and payments, and a Unified Financial Authority (UFA) would cover all other financial services and products. Within this structure, there would be no scope for confusion about who should regulate a Saradha or MMM India as this responsibility would clearly vest with the UFA. This will also bring about more consistency in the regulatory treatment of a range of institutions undertaking similar activities, irrespective of the institution-type.

A central law like the IFC cannot address the problem of dual regulation of cooperative banks, which are regulated by the state governments and the RBI. The FSLRC has recommended that state governments accept the authority of Parliament (under Article 252 of the Constitution) to legislate on regulation and supervision of co-operatives carrying on financial services. Once they do that, financial regulation can fully apply to these institutions.

Defining financial products and services

In the IFC, the definitions of financial products and services are broad and principles-based, with no statutory exemptions. All kinds of deposit-taking and investment schemes (including chit funds) are covered by these definitions. A deposit is defined as a contribution of money, made other than for the purpose of acquiring a security, which may be repayable at the demand of the contributor. In Section 2(90), an investment scheme means:

any arrangement with respect to property of any description, including money, the purpose or effect of which is to enable persons taking part in the arrangement, whether by becoming owners of the property or any part of it or otherwise, to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income, where:

• persons participating in such schemes do not have day-to-day control over the management of the property, whether or not they have the right to be consulted or to give directions; and
  
• the arrangement has either or both of the following characteristics:
  • the contributions of the participants and the profits or income out of which payments are to be made to them are pooled; or
    
  • the property is managed as a whole by or on behalf of the operator of the scheme.
  
  
  

Anyone in the business of accepting deposits or managing investment schemes would need to get authorisation from the UFA. Accordingly, both Saradha and MMM would be covered under the IFC, the former as a deposit-taking firm, and the latter as an investment scheme. In case of the MMM scheme, a unit of MAVRO is the underlying property in which the members invest. The other tests of the definition are also met as the scheme members do not have the ability to control the unit, which is managed by the operators of the scheme.

The IFC also empowers the central government to expand the definitions of financial products and services. When a new financial product or service is observed, instead of waiting for an amendment to the law, the Central Government can include the new product or service in the definition.

Conclusion

Given the limitations of existing financial institutions in meeting the savings and investment appetite of all Indians, innovations in this field are both inevitable and necessary. However, to ensure that this does not happen at the cost of consumer interests, the scope of formal financial regulation needs to be expanded to include large segments of the currently excluded investment grey markets. This also requires us to move away from the present system of having regulatory responsibilities divided among financial regulators and State Governments. The FSLRC's draft law offers a viable solution in terms of conferring the duty of regulating all investment schemes on a single regulatory body that will be fully accountable for this task. The complete, principles-based framework of definitions, that can adapt over the years, will also help minimise regulatory gaps.

How to make progress on payments: a talk

I did a talk How to make progress on payments at the Payment Inclusion Roundtable hosted by the MicroPension Lab of Invest India Micro Pensions:



This is part of the NIPFPMF channel at youtube.

Who is in charge of fiscal policy and tax policy?

In any country, various arms of government like to indulge in taxation of their own choice, and in setting up little treasuries that they control. However, it is quite clear that there must be only one treasury, and only one authority that determines taxation, through only one Finance Act.

In the Economic Times today, I have an article that applies this idea into analysing a recent proposal by DOT to impose an 8% tax on wireline broadband providers.

You may find some of the associated materials useful:

1. Consultation paper issued by DOT on this in December 2012.
2. National Telecom Policy, 2012.
3. TRAI recommendations on broadband.

Competence in policing

David Montgomery, Sari Horwitz and Marc Fisher have a great story in the Washington Post about how the police tracked down the murderers in Boston. Also see Spencer Ackerman in Wired magazine. On a similar theme, look back at the attack at Times Square in New York.

We in India fare dismally on this. Lacking competence in the police, we repeatedly engage in faulty tradeoffs in security, where police either infringe on the freedom of citizens or resort to brutality against innocent `suspects'. Every time the police quickly solve a case, I worry that they merely tortured some plausible sounding suspect.

Law and order is the most important and most basic public good. Dense urban congregations, which are the essence of modern creative capitalism, are only possible with very high levels of safety. The US is priority #1 for the bad guys, and has had two attacks in 12 years, both of which were followed by outstanding investigations. We in India suffer from thousands of attacks, most of which are never solved. This shows the low capabilities of our law enforcement crew.

We in India go wrong at three levels:

• Elections have degenerated into competitive subsidy programs; both politicians and voters have stopped focusing on performance of the government on public goods. Left-oriented intellectuals are complicit in this, with an emphasis on inequality and subsidies rather than on public goods. When voters are not focused on public goods, the accountability through elections does not generate feedback loops in favour of better public goods.
• In this environment, inadequate resources go into public goods, the most important of which is the criminal justice system.
• Within the criminal justice system, there is little accountability, and we are not seeing feedback loops through which the system is constantly reshaped (within existing budget constraints) towards better performance.

The recent wave of outrage on law and order should ideally help set a new course. See Law and order: Going from outrage to action. Mistreating women is not encoded in our culture or our DNA: it is endogenous to the incentives provided by the criminal justice system. The same Indians behave very differently towards women when placed in alternative criminal justice systems in other countries. If enough voters demand performance from politicians for better law and order, we will get a greater focus on it, in terms of:

• More top management time. E.g. how many hours per year does the PM work on law and order in Delhi versus how many hours does he spend on NREGA?
• More money. E.g. how much money do we put into law and order in Delhi versus how much money do we put into NREGA? 
• More and better people. E.g. how do we get the best and brightest civil servants out of relatively unproductive tasks (subsidies) and into the things that matter (public goods)? How do we increase the staff strength of government in public goods, while cutting the size of government on subsidies? How do we make careers in police, courts and jails more attractive, and careers in education, health and welfare programs less interesting?
• More analysis. How do we get more research papers on the criminal justice system, and fewer research papers on development economics?

Sugar: Letting the invisible hand work

by Apoorva Gupta.

The recent announcement that dismantled the levy and monthly release mechanisms, in the sugar industry, will make the industry more efficient and competitive. But much remains to be done. This is a good time to look at the government interventions in this industry, the implications of recent decisions, and the way forward.

Major government controls

With an aim of offering farmers, firms, and consumers a fair deal, the government intervenes in production and distribution through various controls:

1. Minimum price for cane: Under the Sugarcane (Control) Order, 1966 (SCO), the Central government announces a `Fair and Remunerative Price' (FRP) to ensure a good return to farmers. The state governments announce a `State Advised Price'  (SAP) which has typically been higher than the FRP, thus making the FRP redundant. In 2010-11, the SAP was 47% higher than the FRP.
   
2. Cane Reservation Area: To guarantee continuous and sufficient supply of cane to all mills, the area from which a mill can procure cane is reserved. It is also obligatory for the farmer to sell all  produce to the mill in that area. The state has the power to reserve this area under the SCO.
   
3. Minimum Distance Criterion: The Central government, under the SCO, has set a requirement of a 15 km. minimum distance between two mills to ensure supply of cane to all. States are authorised to increase this limit with prior approval from the Center. Punjab, Haryana and Maharashtra have a minimum distance requirement of 25 km.
   
4. Levy Obligation: Under the Levy Sugar Supply (Control) Order, 1979, till recently, mills had to sell 10% of their produce to the government at a price lower than the market price, and this sugar was distributed through the public distribution system.
   
5. Monthly release mechanism: The central government dictated the amount of sugar a mill could release each month in the open market, under the Essential Commodities Act, 1955 and the SCO. This allowed the government to control the prices of sugar in the market. In 2012, the release orders became quarterly.
   
6. Trade Policy: To ensure national food security and contain price volatility, the government has historically used quantitative restrictions on export and import, depending on domestic and foreign conditions.
   
7. Controls on by-products of sugar manufacture: Molasses is used to produce alcohol which is used in the production of potable alcohol, chemicals and blending with petrol. States impose restrictions on the movement of molasses, and artificially reduce the price for the benefit of liquor barons. The Center has not yet released a clear policy on pricing of ethanol for blending in petrol. The state also imposes restrictions on open access sale of power generated from bagasse.
   
8. Compulsory jute packaging : The central government has made it compulsory for mills to pack 40% of the sugar produce in jute bags.

These controls add up to a comprehensive central planning system that blankets the sugar industry.

No one gains!

Each of these controls has created distortions.

#1: The minimum support price aims to ensure a fair price for cane to farmers, but on the contrary, it is the leading cause of accumulation of cane arrears (Rs 5495.04 crore for 2011-12 sugar season). The SAP is often not commensurate with the market price of sugar, making it hard for the mills to pay the farmers in time. Farmers shift to cultivation of a different crop because of delayed payments and this leads to shortages of cane. With lower production of sugar and higher market prices, the mills are able to reduce cane arrears and this incentivises the farmer to shift back to cane cultivation and the cycle is repeated. The graph below shows these fluctuations.

The figure above shows cyclicality in total production, total cane arrears and the average PBDIT of a balanced panel of 50 sugar companies observed in the CMIE Prowess database. There is a direct relationship between the production of sugar and the cane arrears, and an inverse relationship between total production and firm profit. This cycle is characteristic of the present restricted industry industry.  The price and supply of sugar are extremely volatile, even though consumption has been growing at a steady pace. The mills are often working under capacity and many small ones are shut down in the lean season since production is not economically viable. Farmers are burdened with delayed payments, and consumer welfare is reduced due to volatile prices.

#2 and #3: The cane reservation area and minimum distance requirement have fostered creation of monopolies. The farmer is obliged to sell his produce to a mill irrespective of its past payment record and cannot search for the best price for his produce. This gives monopoly power and artificial protection to firms, and helps inefficient firms to persist in the market. Currently, there are approximately 500 mills, some of which operate only in times when the cane is in surplus, produce as little as 500 tonnes of sugar in a year, and have a very low ratio of recovery of sugar from cane. Moreover, these controls do not allow high productivity firms to expand and achieve economies of scale, invest in increasing the acreage and sucrose content of cane.

#4 and #5: The levy obligation imposed a direct cost on mills to the tune of Rs.3000 crore in 2011-12. In 2011-12, the levy sugar price was Rs. 1904 per quintal, while the price of non-levy sugar was Rs. 2749 per quintal, excluding excise. The mills passed on these losses to consumers in the form of higher prices, and to farmers by delaying payments. The monthly release mechanism led to high inventory accumulation costs and made it hard for mills to manage cash flows. These two controls also incentivised mills to hoard inventory, increasing the administrative and litigation costs of implementing these controls.

#6: The abrupt and unanticipated trade barriers in the form of duties and outright bans, has not achieved the desired reduction in price volatility. Besides the dead weight loss of restricting trade, the unstable policy regarding export and import has reduced the ability of mills to foster long term contracts abroad.

#7 and #8: Mills lose money by selling molasses to liquor barons at an artificially low price. The unclear policy on ethanol pricing for oil marketing companies leads to unfulfilled contracts between sugar mills and OMCs and increases losses for both industries, since blending ethanol reduces the price of petrol for OMCs, and mills do not get revenues from the sale of molasses. The restriction on open sale of power generated from bagasse imposes an environmental cost. Compulsory packing in jute bags adds Rs 0.40 per kg of sugar. These policies, which try to develop one industry at the cost of another, eventually increase the cost for consumers and farmers.

Rangarajan Committee recommendations

The Rangarajan Committee was appointed to study the issues related to regulation of the sugar industry in early 2012. They recommended phased decontrol of the industry.

The recommendations include immediate removal of the levy obligation and monthly release mechanism, and phasing out of cane reservation area, minimum distance criterion and trade barriers over the next couple of years. Concerning cane pricing, the committee recommends that cane price should be a combination of FRP and a share in value of sugar. On international trade, they suggest that the current policy should be replaced by moderate duties not exceeding 5-10 percent. The need to deregulate the movement, pricing and quantitative restrictions on by-products of sugar, and abolish mandatory packaging or sugar in jute bags is also emphasised.

Recent decisions on decontrol

The Cabinet Committee on Economic Affairs has recently approved the removal of levy obligation and the monthly release mechanism (#4 and #5), as suggested by the Rangarajan Committee. The markets welcomed this decision, with a cumulative abnormal return of the CMIE COSPI Sugar Industry Index of 9% over the 2 days after the announcement. The spot price of sugar also spiked after the announcement. The market was over-exuberant at the partial decontrol of the industry and some of these gains have been reversed.

The implications of this partial decontrol are:

1. Impact on finances: The removal of levy implies a direct increase in profit for mills of about Rs.3000 crore since they no longer have to sell 10% of the produce at significantly low prices. With the freedom to release stock, the mills will have choices about selling in India and abroad. The mills facing financial problems can liquidate their inventory when needed.
   
2. Reduction in cane arrears: Mills with large cane arrears will now be able to release stock to make pending payments. But as elections come closer, there is a possibility that the SAP is increased and cane arrears accumulate. This will hurt the financial health of the firms.
   
3. Volatility in prices: If mills release too much stock to reduce cane arrears or due to sheer inexperience with a free market, prices might plummet. The strategic moves of mills, rather than decisions of politicians and bureaucrats, will determine prices.
   
4. Greater trading: Since cane is crushed seasonally and the mills have full freedom to release sugar, the trading on futures market will matter more. The futures market will become much more important in shaping decisions of everyone involved in sugar.
5. Survival of the best: Until now the government regulated the amount of sugar released in the market, and the firms had no experience in thinking strategically. Reaching a Bayesian equilibrium will involve learning by doing, and creative destruction in the industry. Mills will require building up financial depth and skills in hedging using futures. Large firms, which have diversified into production of power and alcohol, will have an upper hand.
   
6. Stability in acreage and cyclicality: The ability to manage cash flows would increase the security of payment to farmers, incentivising them to continue with cane cultivation. The mills and farmers (in the area reserved for them) might enter into contracts where the supply of cane is guaranteed, in return for timely payments. This can considerably reduce the amplitude of the sugar cycle and lead to an improvement in cane acreage.
   
7. Impact on the growth of sector: With a better balance sheet, mills will be able to invest more. The global perception of the industry is going to change from highly regulated to partially decontrolled and this might give greater foreign investment. The freedom to release stock in domestic and foreign markets (provided export policy is not binding) will increase the international presence of mills.

Next steps

Of the list of eight controls, the government has removed two. Most of the pending controls come under the purview of the state governments and decontrol of this industry is now largely their task.

#1: Reforming the regulation of price is essential to reduce cyclicality in cane production, which is a leading cause of cane arrears and low profitability. The recommendation of the Rangarajan Committee on pricing of cane suggests that the farmer will be better off as he is protected from uncertainty in the market due to a guaranteed FRP, and also encourages him to invest in increasing the yield of cane for he has a share in the value.

#2 and #3: Abolishing the minimum distance requirement and the cane reservation area will lead to competitive bidding for cane and farmers would be able choose the best price on offer across an array of choices [analogy]. The increased competition to acquire cane might encourage mills to enter into long term contracts with farmers and offer them other benefits such as timely payments irrespective of the phase of the cycle, make them shareholders, and also assist in increasing cane yield. The inefficient firms are likely to perish with more competition in the market, leading to a more consolidated industry.

#6: Removal of trade barriers is likely to make trade more stable, foster global relationships between firms and make Indian firms internationally competitive. In the recent past, imports were duty free and export release orders were removed, suggesting that the government is slowly liberalising trade.

#7 and #8: Decontrolling movement, pricing and allocation of molasses can contribute significantly to the reduction of cyclicality in the sugar industry. In years of a bumper stock, cane can be used to produce molasses directly and can be distributed to all players at competitive prices. This will also make the sector more profitable. Co-generation from bagasse can become a reliable source of power. Removing restriction on sugar packaging will lead to a direct cut in costs of manufacturing.

Conclusion

The government needs to hasten the process of adopting the Rangarajan Committee recommendations. The job of the government is to focus on public goods, such as improved road and rail networks for the transportation of a heavy and perishable good like cane, improved irrigation facilities to reduce the dependence on monsoons and improved information dissemination for price discovery. Market forces will furnish higher efficiency and growth in the system by ensuring the survival of the best firms, fostering mutually beneficial contracts between the farmers and mills, and stabilising the price of sugar for the consumers.

Acknowledgements

This article has greatly benefited from suggestions from Dr. K. P. Krishnan, Dr. Ajit Ranade and Dr. G. S. C. Rao.

FSLRC: The cast of 146

There is little experience in India with large complex projects of drafting law. The process adopted by FSLRC had many strengths. In the table below, I have pulled together the names of all 146 persons mentioned in the report. A diverse array of knowledge and perspective was brought into the project. In addition, the work took place over two years with a large dedicated workforce. In these respects, it represents an important contrast with the small closed groups, and small scale of resources, that have traditionally done drafting of law in India.

		Name		Designation and Organisation		Role in FSLRC
1		Shankar Acharya		Honorary Professor, Indian Council for Research on International Economic Relations		Special Invitee, FSLRC
2		Viral V Acharya		Professor of Economics, New York University Stern School of Business, USA		Honorary Adviser, FSLRC and External Reviewer, Technical Team
3		Late C Achuthan		Corporate Law Chambers India		Member, FSLRC
4		Rajiv Agarwal		Secretary (Consumer Affairs), Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution, Government of India		Special Invitee, FSLRC
5		Varsha Agrawal		Consultant, NIPFP		Member, Technical Team
6		K Aishwarya		Consultant, NIPFP		Member, Technical Team
7		Chirag Anand		Consultant, NIPFP		Member, Technical Team
8		Karan Anand		Consultant, NIPFP		Member, Technical Team
9		Kumar Anand		Consultant, NIPFP		Member, Technical Team
10		Bindu Ananth		President, IFMR Trust		External Reviewer, Technical Team
11		Uday P Apsingekar		Sr. PPS to Chairman, FSLRC		Member, FSLRC Administration Team
12		Molina Asthana		Principal Solicitor, Commercial, Property & Technology, Victorian Government Solicitor's Office, Melbourne, Australia		External Reviewer, Technical Team
13		Jahangir Aziz		Chief Economist, JP Morgan Chase & Co		Advisor and External Reviewer, Technical Team
14		Shobana B		Academic Associate, National Institute of Securities Markets		Member, Technical Team
15		Vikram Bahure		Consultant, NIPFP		Member, Technical Team
16		Tarun Bajaj		Former Joint Secretary (Insurance & Pension), Department of Financial Services, Ministry of Finance, Government of India		Member, Working Group on Insurance, Retirement Financing and Small Savings
17		Vimal Balasubramaniam		Consultant, NIPFP		Member, Technical Team
18		Dipak Banerjee		OSD, FSLRC		Member, FSLRC Administration Team
19		Sanjay Banerji		Professor of Finance, University of Nottingham Business School, UK		External Reviewer, Technical Team
20		Vishvesh Bhagat		Senior Vice President (Legal, Compliance & vigilance), National Institute of Securities Markets		Member, FSLRC Administration Team
21		Sudarshan Bhattacharjee		Consultant, NIPFP		Member, Technical Team
22		C B Bhave		Former Chairman, Securities and Exchange Board of India		Advisor and External Reviewer, Technical Team
23		M G Bhide		Former Chairman and Managing Director, Bank of India		Member, Working Group on Banking
24		Paul Binsted		Chairman, Financial Sector Advisory Council, Australia		Country Expert Consultation
25		Mark Boleat		City of London Roundtable, UK		Country Expert Consultation
26		Michele Bourque		President, Canada Deposit Insurance Corporation, Canada		Country Expert Consultation
27		Sarah Breeden		Prudential Regulatory Authority Transition Team, UK		Country Expert Consultation
28		Mike Callaghan		Executive Director, Treasury, Australia		Country Expert Consultation
29		Jeff Carmichael		Wallis Inquiry Member and Inaugural Chairman, Australian Prudential Regulation Authority, Australia		Country Expert Consultation
30		Sumathi Chandrashekaran		Consultant, NIPFP		Member, Technical Team
31		Ashok Chawla		Chairperson, Competition Commission of India		Special Invitee, FSLRC
32		Rajendra P Chitale		Managing Partner, M.P.Chitale & Co		Special Invitee, Working Group on Insurance, Retirement Financing and Small Savings
33		Russell Collins		Chairman, Financial Sector Practitioners' Panel, UK		Country Expert Consultation
34		Mary Condon		Vice-Chair, Ontario Securities Commission, Canada		Country Expert Consultation
35		Matt Crooke		Minister-Councillor, Australian High Commission, New Delhi		Country Expert Consultation
36		Devika Das		Consultant, NIPFP		Member, Technical Team
37		Pratik Datta		Consultant, NIPFP		Member, Technical Team
38		Akhil Dua		Consultant, NIPFP		Member, Technical Team
39		Alex Etra		Consultant, NIPFP		Member, Technical Team
40		Patty Evanoff		Senior Director, Office of the Superintendent of Financial Institutions, Canada		Country Expert Consultation
41		Stuart Fraser		City of London Roundtable, UK		Country Expert Consultation
42		Neeraj Gambhir		Head, Fixed Income Business for India, Nomura Holdings Inc		Member, Working Group on Securities
43		Meeta Ganguly		Consultant, NIPFP		Member, Technical Team
44		Charles Goodhart		Professor and Director of Financial Regulation Research Programme,London School of Economics, UK		Country Expert Consultation
45		R Gopalan		Secretary, Department of Economic Affairs, Ministry of Finance, Government of India		Special Invitee, FSLRC
46		Abhishek Gupta		Consultant, NIPFP		Member, Technical Team
47		Apoorva Gupta		Consultant, NIPFP		Member, Technical Team
48		Monika Halan		Editor, Mint Money		External Reviewer, Technical Team
49		Mark Hoban		Financial Secretary, The Treasury, UK		Country Expert Consultation
50		Lord Hoffman		Chairman, Financial Markets Law Committee, UK		Country Expert Consultation
51		Neena Jacob		Consultant, NIPFP		Member, Technical Team
52		Bhavna Jaisingh		Consultant, NIPFP		Member, Technical Team
53		Bimal Jalan		Former Governor, Reserve Bank of India		Special Invitee, FSLRC
54		Parikshit Kabra		Consultant, NIPFP		Member, Technical Team
55		Madhu Kannan		Former Managing Director and CEO, Bombay Stock Exchange Limited		Member, Working Group on Securities
56		Shreeya Kashyap		Consultant, NIPFP		Member, Technical Team
57		Vijay Kelkar		Chairman, Forum of Federations, Ottawa & India Development Foundation, New Delhi		Special Invitee, FSLRC
58		Vikramaditya Khanna		Professor, University of Michigan Law School, USA		External Reviewer, Technical Team
59		Sudhamoy Khasnobis		Founder, i-Care Life Pte. Ltd, Singapore		Expert and External Reviewer, Technical Team
60		Naina Lal Kidwai		Group General Manager and Country Head, HSBC India		Member, Working Group on Banking
61		James Knight		Debt Management Office, UK		Country Expert Consultation
62		Sunder Ram Korivi		Dean, School for Securities Education, National Institute of Securities Markets		Member, Technical Team
63		T Koshy		Executive Director, Advisory Services, Ernst & Young Private Limited		External Reviewer, Technical Team
64		K P Krishnan		Secretary, Economic Advisory Council to Prime Minister, Government of India		External Reviewer, Technical Team
65		Amol Kulkarni		Consultant, NIPFP		Member, Technical Team
66		Aishwarya Kumar		Consultant, NIPFP		Member, Technical Team
67		Shekhar Hari Kumar		Consultant, NIPFP		Member, Technical Team
68		Kanagasabapathy Kuppuswamy		Director, EPW Research Foundation		Member, Working Group on Debt Management Office
69		Bikku Kuruvila		Legal Consultant, New York, USA		Legal Consultant, Technical Team
70		John Laker		Chairman, Australian Prudential Regulation Authority, Australia		Country Expert Consultation
71		Rajiv Lall		Managing Director and Vice Chairman, Infrastructure Development Finance Company		Member, Working Group on Banking
72		Timothy Lane		Deputy Governor, Bank of Canada		Country Expert Consultation
73		Tiff Macklem		Senior Deputy Governor, Bank of Canada		Country Expert Consultation
74		Yezdi H Malegam		S.B. Billimoria & Company		Member, FSLRC and Member, Working Group on Banking
75		Aakriti Mathur		Consultant, NIPFP		Member, Technical Team
76		Kate McKee		Senior Advisor, CGAP		External Reviewer, Technical Team
77		Poonam Mehra		Assistant Professor, National Institute of Securities Markets		Member, Technical Team
78		Ursula Menke		Commissioner, Financial Consumer Agency of Canada		Country Expert Consultation
79		Ravi Menon		Managing Director, Monetary Authority of Singapore		Country Expert Consultation
80		Apoorva Ankur Mishra		Consultant, NIPFP		Member, Technical Team
81		Percy S Mistry		Director, J P Morgan Emerging Markets Investment Trust		Expert, FSLRC
82		Ambarish Mohanty		Consultant, NIPFP		Member, Technical Team
83		Nachiket Mor		Chair, Sugha Vazhvu Health Care Private Limited		External Reviewer, Technical Team
84		C K G Nair		Secretary, FSLRC		Secretary, FSLRC
85		N K Nampoothiry		Special Secretary, Department of Legal Affairs, Ministry of Law and Justice, Government of India		Expert, Technical Team
86		Ravi Narain		Managing Director & CEO, National Stock Exchange		Member, Working Group on Securities
87		S A Narayan		Managing Director, Kotak Securities Limited		Member, Working Group on Securities
88		Badri Narayanan		Advisor, Third Eye Capital Advisors LLP		External Reviewer, Technical Team
89		P J Nayak		Chairman, Morgan Stanley India Company Pvt. Ltd.		Member, FSLRC and Chairman, Working Group on Payments
90		Uttam Nayak		Country Manager, VISA		Member, Working Group on Payments
91		Lyndon Nelson		Director, Financial Services Authority, UK		Country Expert Consultation
92		Rob Nicholl		CEO, Debt Management Office, Australia		Country Expert Consultation
93		Justice Debi Prasad Pal		Member, FSLRC		Member, FSLRC
94		Radhika Pandey		Consultant, NIPFP		Member, Technical Team
95		Ritvik R Pandey		Director (Budget), Department of Economic Affairs, Ministry of Finance, Government of India		Expert , Technical Team
96		Deepak S Parekh		Non-executive Chairman, Housing Development Finance Corporation		Special Invitee, FSLRC
97		Bobby Parikh		Managing Partner, BMR & Associates		Consultant, FSLRC
98		Smriti Parsheera		Consultant, NIPFP		Member, Technical Team
99		Ila Patnaik		Professor, NIPFP		Co-lead, Technical Team
100		Avinash Persaud		Senior Fellow, Caribbean Policy Research Institute		Honorary Advisor, FSLRC
101		Bharat Poddar		Group Head, Boston Consulting Group, India		Member, Working Group on Payments
102		Anuradha Prasad		Chief Controller of Defence Accounts, Government of India		Member, Working Group on Insurance, Retirement Financing and Small Savings
103		Madhavi Pundit		Assistant Professor, NIPFP		Member, Technical Team
104		Aditya Puri		Managing Director, HDFC Bank Ltd		Member, Working Group on Banking
105		Suyash Rai		Consultant, NIPFP		Member, Technical Team
106		Raghuram G Rajan		Chief Economic Advisor, Department of Economic Affairs, Ministry of Finance, Government of India		Special Invitee, FSLRC
107		Tarun Ramadorai		Professor of Financial Economics, Said Business School & Oxford-Man Institute of Quantitative Finance, University of Oxford, UK		Honorary Advisor and External Reviewer, Technical Team
108		Kavitha Ranganathan		Programme Manager (Academic), National Institute of Securities Markets		Member, Technical Team
109		C Rangarajan		Chairman, Economic Advisory Council to the Prime Minister, Government of India		Special Invitee, FSLRC
110		C S Rao		Former Chairman, Insurance Regulatory and Development Authority		Senior Adviser, Working Group on Insurance, Retirement Financing and Small Savings
111		M Govinda Rao		Director, NIPFP		Member, FSLRC and Chairman, Working Group on Debt Management Office
112		Rajshekhar Rao		Advocate		Consultant, FSLRC
113		Sowmya Rao		Consultant, NIPFP		Member, Technical Team
114		O N Ravi		Corporate Development Officer, Clearing Corporation of India Limited		Honorary Advisor and External Reviewer, Technical Team
115		Barbara Ridpath		CEO Regulation, International Centre for Financial Regulation, UK		Country Expert Consultation
116		Shubho Roy		Consultant, NIPFP		Member, Technical Team
117		Jeremy Rudin		Assistant Deputy Minister, Department of Finance, Canada		Country Expert Consultation
118		K G Sahadevan		Professor of Economics, Indian Institute of Management, Lucknow		Member, Working Group on Securities
119		M S Sahoo		Former Member, Securities and Exchange Board of India		Legal Consultant, Technical Team
120		Renuka Sane		Research Economist, Indira Gandhi Institute of Development Research, Mumbai		External Reviewer, Technical Team
121		Subrata Sarkar		Professor, Indira Gandhi Institute of Development Research, Mumbai		External Reviewer, Technical Team
122		Ankur Narain Saxena		Consultant, NIPFP		Member, Technical Team
123		Sally Scutt		Deputy CEO, British Bankers' Association, UK		Country Expert Consultation
124		Ajay Shah		Professor, NIPFP		Co-lead, Technical Team
125		Sanjiv Shah		Executive Director, Goldman Sachs, India		Member, Technical Team
126		A P Singh		Joint Secretary, Unique Identification Authority of India, Planning Commission, Government of India		Member, Working Group on Payments
127		Darshika Singh		Consultant, NIPFP		Member, Technical Team
128		Neeraj Singh		Consultant, NIPFP		Member, Technical Team
129		A K Sinha		Deputy Secretary, FSLRC		Member, Administration Team
130		Abhishek Sinha		CEO, EKO India Financial Services Private Limited		Member, Working Group on Payments
131		Janmajeya Sinha		Chairman of Asia-Pacific Operations, Managing Director of Mumbai Operations and Senior Partner, Boston Consulting Group, Inc.		Member, Working Group on Banking
132		Justice B N Srikrishna		Chairman, FSLRC		Chairman, FSLRC
133		Glenn Stevens		Governor, Reserve Bank of Australia		Country Expert Consultation
134		Gregory Stevens		Prudential Regulatory Authority Transition Team, UK		Country Expert Consultation
135		Robert Stheeman		CEO, UK Debt Management Office		Country Expert Consultation
136		Somasekhar Sundaresan		J. Sagar Associates, Advocate & Solicitors		Consultant, FSLRC
137		Dhirendra Swarup		Member, FSLRC		Member Convenor, FSLRC, Chairman, Working Group on Insurance, Retirement Financing, and Small Savings and Member, Working Group on Debt Management Office
138		Lucie Tedesco		Deputy Commissioner, Financial Consumer Agency of Canada		Country Expert Consultation
139		Ranjit Tinaikar		Partner, McKinsey & Company, India		Member, Working Group on Payments
140		K J Udeshi		Chairperson, Banking, Codes & Standards Board of India		Member, FSLRC and Chairperson, Working Group on Banking
141		K N Vaidyanathan		Chief Risk Officer, Mahindra and Mahindra		Honorary Advisor and External Reviewer, Technical Team
142		Harsh Vardhan		Partner, Bain & Company		Member, Working Group on Banking
143		Jayanth R Varma		Professor (Finance and Accounting), Indian Institute of Management, Ahmedabad		Member, FSLRC and Chairman, Working Group on Securities
144		Kaushalya Venkataraman		Consultant, NIPFP		Member, Technical Team
145		Yesha Yadav		Assistant Professor of Law, Vanderbilt University Law School, USA		External Reviewer, Technical Team
146		Mark Zelmer		Assistant Superintendent, Office of the Superintendent of Financial Institutions, Canada		Country Expert Consultation