Improving legal transparency at the RBI

by Amol Kulkarni and Renuka Sane.

A core function of several Indian regulators is adjudication, which involves investigating potential violations, determining culpability, and imposing appropriate sanctions. In India, most financial sector regulators, including the Securities and Exchange Board of India (SEBI), and the Insurance Regulatory and Development Authority of India (IRDAI), issue reasoned orders outlining the investigation, findings, and the rationale behind the imposed sanctions (SEBI, ADJ; IRDAI, ENF). These orders are not only accessible to the concerned parties but are also made available in the public domain, promoting transparency and accountability. The availability of orders in the public domain has led to important research on the quality of the adjudicatory function at regulators and spawned a debate on how to improve it (Sane et al, 2021, 2022; Aggarwal et al, 2024, 2024A).

The Reserve Bank of India (RBI) is a notable exception (RBI, REG). While it is empowered to impose diverse sanctions on its regulated entities including penalties, suspension and cancellation of licenses, imposition of business restrictions, and supersession of the board, it does not release its orders in the public domain. The RBI discloses only the sanctions and their revocation on regulated entities through press releases (PRs) on its website. This is unlike banking regulators in other jurisdictions who either have to put out their orders in the public domain or argue their side in administrative courts which publish their orders on their websites (FCO, ADJ). The RBI is unique in having the full powers of adjudication without the requirement of transparency in its adjudicatory process or an appropriate appellate review mechanism (RBI, APL). Neither the orders of the RBI nor of its [internal] appellate authorities are available in the public domain. If and when a matter reaches a high court or the Supreme Court, orders of such authorities become available for public reading.

This opacity surrounding the RBI's adjudication process motivates our research. The extensive use of PRs to impose sanctions and a single PR to sanction more than one entity raises questions about clarity in disclosures regarding violations by regulated entities and the consistency of information related to sanctions. While it is a rule of law principle that orders should be put out in the public domain, to ensure know-ability of the law and foster consistency in decision making, we focus on improving at least the content of its PRs. It is easy to think of RBI's PRs as a mere corporate communication function, however, what RBI chooses to disclose by way of PRs is reflective of its broader approach to legal transparency.

In this article, we delve into the information disclosed in the RBI's PRs concerning enforcement actions against regulated entities. Furthermore, we investigate how central banks in different jurisdictions communicate sanctions and the level of detail they provide in their public disclosures. This comparative analysis allows us to benchmark the RBI's practices against international standards and identify best practices that could enhance transparency and accountability. Our analysis can form the basis for improving the RBI's disclosure framework. By adopting a more transparent approach to disclosing enforcement actions, the RBI can foster greater understanding and confidence in its regulatory processes.

Methods

We examine two cases between May 2024 and January 2025 wherein the RBI imposed and revoked sanctions on its regulated entities through PRs. Both cases included more than one entity. We evaluate if the regulator:

1. Was consistent in disclosing violations by entities.
2. Provided the rationale for imposing sanctions.
3. Described the remedial measures taken by the regulated entities which necessitated revoking the sanctions.

We then review practices by other central banks on disclosures of sanctions and offer suggestions for improvement to the RBI.

Brief introduction to the two cases

We examined the imposition and revocation of sanctions on four NBFCs (Case 1) and two asset reconstruction companies (ARCs) (Case 2).

Case 1:

RBI's PR dated 17 October 2024 (October PR) sanctioned four unrelated NBFCs to cease and desist from sanction and disbursal of loans (RBI PR, 2024A).

Within a few months of imposition, the RBI issued more PRs between December 2024 and January 2025 announcing the lifting of business restrictions on all four NBFCs (Dec-Jan PRs).

The Dec-Jan PRs provided a common reason for lifting the restrictions on four NBFCs (RBI PR, 2025):

...Now, having satisfied itself based on company's submissions, and in view of adoption of revamped processes, systems, and the company's commitment to ensure adherence to the Regulatory Guidelines on an ongoing basis, especially for ensuring fairness in the loan pricing, the Reserve Bank has decided to lift the afore-mentioned restrictions placed on... with immediate effect.

Case 2:

The press release dated 29 May 2024 (May PR) sanctioned two entities belonging to the Edelweiss group: ECL Finance Limited (ECL) and Edelweiss Asset Reconstruction Company Limited (EARCL). ECL was prohibited from undertaking any structured transactions in respect of its wholesale exposures. EARCL was directed to cease and desist from acquisition of financial assets (RBI, PR 2024).

These sanctions were lifted through a PR dated 17 December 2024 (December PR). Similar language as used in Case 1 was used (RBI PR, 2024B):

...Now, having satisfied itself based on submissions and remedial measures put in place by these companies to address the concerns of RBI and their commitment to ensure adherence to the Regulatory Guidelines at all times and on an ongoing basis, the Reserve Bank has decided to lift the afore-mentioned restrictions placed on...with immediate effect.

Comparing the disclosures

We now compare the disclosures relating to the imposition and revocation of sanctions by the RBI in the two cases. The objective is to identify any consistent trends and point out inconsistent disclosure practices.

Imposition of sanctions

In Case 1, wherein four unrelated NBFCs were sanctioned through a single PR and for similar violations, it is difficult to identify specific non-compliances by each of the sanctioned NBFCs. It is also not clear if all the NBFCs were equally violating all the norms mentioned in the October PR, or to different degrees. Concerns have been raised regarding the proportionality of RBI actions, particularly since some NBFCs were in the business for several years, while others were relatively new. Thus, one wonders if it was desirable to subject all NBFCs to the same sanction, and the possible unintended consequences of such business restrictions on entities doing business with, including customers of, such NBFCs (Sane, 2024).

Similar to Case 1, sanctions were imposed on more than one entity in Case 2. However, a key difference is that the four NBFCs sanctioned in Case 1 were unrelated to each other while the two entities sanctioned in Case 2 were Edelweiss group companies (EGCs).

While the violations by two EGCs in a consolidated manner, the May PR also highlighted the violations at an individual level. While PRs in both cases lack critical details about the violations, the regulator's inconsistent approach to the extent to which it intends to disclose violations by regulated entities is evident from the review and comparison of these PRs.

Rationale for imposition of sanctions

On the rationale for the imposition of sanctions, the October PR related to Case 1 does not provide any information other than the violations. The May PR related to Case 2 highlights efforts made by the RBI to engage with relevant entities to rectify the deficiencies and take meaningful remedial action, which remained unsatisfactory. While limited, such additional information helps in better understanding the rationale for business restrictions imposed by the regulator, the efforts it took to work with regulated entities to come up with a solution, and whether any alternatives were considered. No such information is present in the October PR related to Case 1, highlighting another component of inconsistencies between disclosures by the RBI relating to violations committed by regulated entities and sanctions imposed by it.

The disclosures imposing and revoking sanctions on regulated entities do not seem to be consistent. While the former typically lays down key violations and broad remedial measures which the RBI will take into account for reviewing the violations, the latter seems to be devoid of any specific details regarding remedial measures taken by the sanctioned entities resulting in the lifting of business restrictions.

Such lack of information is particularly concerning when the time between imposition and lifting of sanctions is quite short, and when the regulator has itself highlighted the uncooperative nature of regulated entities and their tendency to resort to new ways to circumvent regulations, like in Case 2. For instance, for Navi NBFC in Case 1, the sanctions were lifted in less than one and a half months of imposition. What is unclear are the actions or course corrections the NBFCs took to get such a respite within a short duration of the imposition of restrictions.

Moreover, while imposing sanctions the RBI often highlights areas wherein remedial action is expected from the sanctioned entities. Such areas seem to have been ignored while revoking sanctions. For instance, in Case 1, the RBI specified that remedial actions were expected in pricing policies, risk management processes, customer service and grievance redress aspects. However, the Dec-Jan PRs specifically highlighted that NBFCs had taken actions to ensure fairness in loan pricing. No reference was made to other areas repeatedly identified by the regulator while imposing sanctions. In case 2, even this information, about the key area related to which remedial action was taken by the sanctioned EGCs, was missing.

Despite being inconsistent in disclosing relevant information while imposing sanctions, and in disclosures during imposing and revoking sanctions, the RBI is quite consistent when disclosing the rationale (or the lack thereof) of revoking sanctions, even when the violations differ.

The language of December PR lifting business restrictions in Case 2 is significantly similar to the language of Dec-Jan PRs lifting business restrictions in Case 1. The regulator ighlighted that it is satisfied by the remedial measures taken by the sanctioned entities. There is no information about the nature of remedial measures, whether they were taken in areas wherein deficiencies were identified, and mechanisms through which RBI satisfied itself, among other things.

The following table summarily compares the disclosures in both cases and shows the inconsistency in the PRs.

S. No	Indicator	Case 1	Case 2
1	Identification of sanctioned entities	Yes	Yes
2	Common non-compliances by all entities	Yes	Yes
3	Specific violations by each violator	No	Yes
4	Common sanctions on all entities	Yes	No
5	Specific sanctions on each entity	No	Yes
6	Additional rationale for sanctions	No	Yes
7	Conditions for review of sanctions	Yes	Yes
8	Specific remedial measures expected from sanctioned entities	Yes	Yes
9	Broad rationale for the lifting of sanctions	Yes	Yes
10	Specific remedial measures taken by sanctioned entities	Yes	No
11	Consistency between remedial action expected and taken	No	No

Transparency by other central banks

The Federal Reserve (Fed), the central bank of the United States, takes enforcement actions against its regulated entities. Like RBI, the Fed issues PRs announcing enforcement actions and their terminations (FED PR). In addition, the Fed releases consent orders on its website (FED PR, 2024). Interestingly, unlike the RBI, one Fed PR covers more than one entity only when such entities are related parties (FED PR, 2025).

On its website, the Fed arranges disclosures related to sanctions in a reader-friendly manner. The sanctions are listed under heads like effective date, termination date, the party subject to action (banking organisation or individual), and enforcement action, along with a link to the PR (FED ENF):

Figure 1: Sanctions imposed by Federal Reserve

The Fed disclosures typically fix responsibility on the board of directors of the regulated entities to comply with the sanctions, and to take corrective actions (FED AGR, 2023):

Bancorp's board of directors shall take appropriate steps to fully utilise Bancorp's financial and managerial resources including, but not limited to, taking steps to ensure that the Bank complies with this Agreement...

Each of the corrective actions is then listed out, along with the period within which such action needs to be completed:

Within 60 days of the effective date of this Agreement, the board of directors of the Bank shall submit a written plan to the Supervisors to strengthen board oversight of the management and operations of the Bank. The plan shall include the following four items...

The disclosure then discusses the sanction:

Effective immediately, Bancorp shall not, directly or indirectly, declare or pay dividends, engage in share repurchases, or make any other capital distribution in respect of common shares,... without the prior written approval of the Reserve Bank and the Director of Supervision and Regulation of the Board of Governors...

A separate disclosure terminating the sanction is issued by the Fed (FED PR 2025A).

Like the Fed and the RBI, the European Central Bank (ECB) is the central bank of the European Union countries which have adopted the euro. It has been empowered to impose sanctions on its regulated entities, in case of non-compliance. It also issues PRs disclosing sanctions it imposed, similar to other regulators. Along with the PRs, the ECB issues a publication with some additional details regarding the violation and rationale for the sanction.

Similar to the Fed but unlike the RBI, the ECB neatly discloses its sanctions under headings like date of ECB decision, supervised entity, amount, area of infringement, further information, and decision status, as indicated below (ECB SAN):

Figure 2: Sanctions imposed by European Central bank

Arrangements of sanctions in this reader-friendly manner fosters ease of search and understanding for regulated entities and interested stakeholders.

The ECB PRs identify the non-compliance and its period. For instance, in its PR dated 20 December 2024 related to BNP Paribas, the ECB states (ECB PR, 2024):

Between 2014 and 2021, for 31 consecutive quarters, BNP Paribas Fortis SA/NV understated its risk-weighted assets connected to factoring exposures of its subsidiary in Belgium.

The ECB PRs also fix responsibility and accountability on regulated entities by indicating if the non-compliance was willful or not:

The bank knowingly reported wrongly calculated figures to the competent authorities, thereby preventing them from having a comprehensive view of its risk profile.

The ECB PRs then go on to explain the significance of the non-compliance and adverse consequences of the violation:

As a result of underestimating its risk-weighted assets, BNP Paribas Fortis SA/NV did not calculate its capital requirements properly and reported higher capital ratios than it should have.

The ECB PR also discloses the rationale for the sanction:

When setting a pecuniary penalty, the ECB applies its dedicated public guide (ECB, 2021). In this case, the ECB has classified the breach as 'severe'.

Along with the PR, the ECB issues a publication with some additional details regarding the violation and rationale for sanction, such as (ECB, 2024):

The ECB assessed the impact of the breach as 'medium' based on the effect that the breach had on the prudential situation of the entity and its effective supervision. This was determined on the basis of the importance of reporting obligations for ongoing supervision, the duration of the breach and the extent to which the reported figures differed from those calculated using less sophisticated regulatory approaches, which prevented the ECB from obtaining a comprehensive view of the risk profile and the prudential situation of the entity in the relevant period...

Such disclosures can provide appropriate guidance to the regulated entities in planning their operations. Also, entities doing business with, and customers of, sanctioned entities are likely to find themselves in a better position to determine whether or not to continue engaging with sanctioned entities.

Like the Fed, it also appears that the ECB does not impose multiple sanctions through a single PR unless the sanctioned entities are related parties.

Conclusion

From a review of sanction-related PRs and disclosures by the RBI, the Fed, and the ECB, the RBI may consider the following suggestions to improve its practices:

1. Not to issue a single PR disclosing sanctions on multiple entities, unless those entities are related parties or acting in concert.
2. Identify violations by the sanctioned entities.
3. Disclose corrective actions and the period within which such actions are required to be taken.
4. Highlight the sanctions and rationale for the same. It appears that the RBI has an enforcement policy which lists factors that it needs to consider while imposing sanctions (RBI AR, 2019). The RBI may consider disclosing relevant factors which it took into account while imposing specific sanctions.
5. Highlight the corrective actions taken by the sanctioned entities while revoking sanctions.

In addition, the RBI can get inspiration from the ECB and the Fed to arrange its sanctions-related PRs in a searchable and user-friendly manner. Further, the Parliament needs to require the RBI to not only give "speaking orders", but also put its written orders in the public domain. This becomes essential as the RBI is using PRs for a very weighty function, that of legal transparency. A commensurate serious process design for ensuring that relevant information is consistently disclosed in public domain, is therefore necessary.

References

Aggarwal et al, 2024A: Natasha Aggarwal, Bhavin Patel, and Renuka Sane, 2024, The exercise of discretionary powers: The case of debarment and restraint from capital markets, The Leap Blog.

Aggarwal et al, 2024: Natasha Aggarwal & Bhavin Patel, 2024, Bypassing expert tribunals through writs: Judicial overreach in review of the Telangana State Electricity Regulatory Commission's orders, Working Papers 7, Trustbridge Rule of Law Foundation.

ECB PR, 2024: European Central Bank Press Release, ECB sanctions BNP Paribas Fortis SA/NV for misreporting capital requirements, 20 December 2024.

ECB SAN: European Central Bank, Sanctions imposed by the ECB.

ECB, 2021: European Central Bank, Guide to the method of setting administrative pecuniary penalties pursuant to Article 18(1) and (7) of Council Regulation (EU) No 1024/2013, March 2021.

ECB, 2024: European Central Bank, Imposition of an administrative penalty on BNP Paribas Fortis SA/NV, December 2024.

FCO, ADJ: The decisions of Financial Conduct Authority of UK are appealable at Upper Tribunal (Tax and Chancery Chamber). Decisions of the Upper Tribunal are available here.

FED AGR, 2023: Written Agreement by and among Marblehead Bancorp Marblehead, Ohio Marblehead Bank Marblehead, Ohio Division of Financial Institutions Columbus, and Federal Reserve Bank of Cleveland Cleveland, Ohio, October 2023.

FED ENF: Board of Governors of the Federal Reserve System, Enforcement Actions.

FED PR, 2024: Board of Governors of the Federal Reserve System, Order to Cease and Desist Issued Upon Consent in the matter of First Murphysboro Corp, 25 November 2024.

FED PR, 2025: Board of Governors of the Federal Reserve System Press Release, Federal Reserve Board announces termination of enforcement action with Marblehead Bancorp and Marblehead Bank, 23 January 2025, wherein the former is owner and controller of the latter.

FED PR, 2025A: Federal Reserve Board announces termination of enforcement action with Marblehead Bancorp and Marblehead Bank, 23 January 2025.

FED PR: Board of Governors of the Federal Reserve System, Press Releases.

IRDAI, ENF: IRDAI enforcement actions are available here.

RBI AR, 2o19: RBI Annual Report 2018-19, RBI Enforcement Policy and Framework is available in Box VI.6 here.

RBI PR, 2024: RBI Press Release, Supervisory Action against ECL Finance Limited and Edelweiss Asset Reconstruction Company Limited based on material supervisory concerns, 29 May 2024.

RBI PR, 2024A: RBI Press Release. Action against select NBFCs including NBFCs-MFIs, 17 October 2024, The sanctioned entities were Asirvad Micro Finance Limited, Arohan Financial Services Limited, DMI Finance Private Limited, and Navi Finserv Limited.

RBI PR, 2024B: RBI Press Release, Removal of supervisory restrictions: ECL Finance Limited and Edelweiss Asset Reconstruction Company Limited, 17 December 2024.

RBI PR, 2025: RBI Press Release, Removal of supervisory restrictions: (i) Asirvad Micro Finance Limited, Chennai and (ii) DMI Finance Private Limited, New Delhi, 8 January 2025.

RBI, APL: Appeals against different RBI enforcement actions are maintainable before Appellate Authorities mentioned in the relevant regulatory instruments. For instance, as per the RBI Master Circular on Scheme of Penalties, appeal against penalties imposed by RBI is maintainable with the Regional Director/Chief General Manager/Officer-in-Charge of the Regional Office concerned. See here. Similarly, under the PSS Act, the Officer-in-Charge of Department of Payment and Settlement Systems at the Central Office of the Reserve Bank of India is the Appellate Authority. See here. Orders of such appellate authorities are not available in public domain.

RBI, REG: The RBI regulates different entities, including banks, non-bank finance companies (NBFCs), payment service providers, asset reconstruction companies, cooperative banks, and housing finance companies. It derives its powers from the Banking Regulation Act, 1949; the RBI Act, 1934; the Payment and Settlement Systems Act, 2007; and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, among others.

Sane et al, 2021: Sane, Renuka and Trishee Goyal, Towards better enforcement by regulatory agencies, 2021.

Sane et al, 2022: Sane, Renuka and Vivek, S., Reconsidering SEBI Disgorgement (May 31, 2022).

Sane, 2024: Sane, Renuka (2024), Order Restricting 4 NBFC operations lacks clarity. It won't help customers, companies, The Print, 23 October 2024.

SEBI, ADJ: SEBI adjudicatory orders are available here.

The authors are researchers at the TrustBridge Rule of Law Foundation.

Author: Bhavin Patel

Bhavin Patel is a Researcher at TrustBridge Rule of Law Foundation, New Delhi.

On this blog:

• Balancing Power and Accountability: An Evaluation of SEBI's Adjudication of Insider Trading, 2 April 2025.
• A guide to writing good regulatory orders, 13 March 2025.
• Judicial overreach: Bypassing expert tribunals in the electricity sector, 9 December 2024.
• The exercise of discretionary powers: The case of debarment and restraint from capital markets, 20 July 2024.
• Concerns about recent developments on SEBI's regulation-making on market rumours and insider trading, 6 May 2024.
• Assessing regulatory capability in Tamil Nadu electricity regulation: Evidence from appeals, 26 April 2024.

Be you ever so high, the markets are always above you

by Ajay Shah.

Purposive state action is fraught with error. Human and social systems are poorly understood and contain nonlinearities, so there is a law of unintended consequences. Grand schemes go wrong. What works well is a humble approach, of crossing the river by feeling the stones, in an environment of expertise. There are two rings of containment of power, that help address a regime which diverges from this approach.

Two rings of check-and-balance

The first ring of containment of power is the checks and balances of the political system. Liberal democracies work by dispersing power, by using ambition to counteract ambition. This curtails mistakes.

In some situations, these things break down. Power becomes concentrated, which induces mistakes. The second ring of containment is the financial markets.

1. When Liz Truss was Prime Minister in the UK, the markets pushed back. The 30-year yield went from 3.6% to 5.1%. The GBP dropped 7.6%. The FTSE fell 7%. Ultimately, this led to her being ousted in 44 days.
   
   
2. When Tony Blair and the labour party won the elections on 2 May 1997, the financial markets expressed skepticism. When a new government is greeted with a higher interest rate, this immediately curtails spending power. This pushed the new government to go through with a group of responsible decisions. On 6 May 1997 (i.e. 4 days after winning), they announced independence for the Bank of England coupled with the creation of an independent Debt Management Office so as to unburden monetary policy from the debt management conflict of interest. On 2 July, in the budget speech, they were cautious in their spending commitments. All these actions were crafted because the second ring of containment impinged upon the political leadership.
   
   
3. Vijay Kelkar has long argued that the stock market crash of 17 May 2004 helped encourage Sonia Gandhi to choose the team of Manmohan Singh, P. Chidambaram and Montek Ahluwalia as the UPA economic policy leadership, which delivered the economic successes of 2004-2011.
   
   
4. James Carville worked for Bill Clinton. A rough analogy into Indian politics would be Amar Singh. He once said: "I used to think that if there was reincarnation, I wanted to come back as the President or the Pope or as a 400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody." This awareness tempered and shaped the early actions of the Clinton presidency, which worked out as a successful period for the American economy. 
   
   
5. It is starting to work out similarly with the Trump Tariffs. The wheels of global general equilibrium started turning on 2 April, with forward looking forecasts embedded in financial market prices. Financial players everywhere asked: How well will the US economy work? Is the US the safe haven, with sound institutions, that we thought it was?
   
   The 10 year US Treasury went up from 3.9% to 4.5%. The 30 year bond briefly went up to 5%. The S&P 500 dropped 12.1%. Safe haven seekers turned to Germany, and yields on government bonds there fell. Larry Summers said on 9 April:  "We are being treated by global financial markets like a problematic emerging market".
   
   In my column in the Business Standard of 3 March, I had said that in the US, the first ring of containment has broken down --
   

   The US is in a constitutional crisis, with a failure of checks and balances, with the inability of the judiciary, the legislature, the electoral system, the agencies, the special counsel and the press to rein in a strongman.

   and that the second ring of containment would have to do its work --
   

   Market discipline will then impinge upon Trump and the MAGA world, and we hope, atleast partly kick them into shape. Be you ever so high, the markets are always above you.

Market discipline is not perfect. In the field of sovereign risk, we know well that the market tolerates a lot of fiscal misbehaviour for a long time, and then abruptly pulls access. Similarly, I have argued that the Indian equity market fares poorly on macro forecasting while it does well on micro-forecasting. The wrath of the market involves caprice. The key point here is that markets do speak truth to power, over and beyond the checks and balances of the political system.

A development perspective

The yearning for raw power is there in many people. On 9 April 2025, Donald Trump described his decision process: "Instinctively, more than anything else. I mean, you almost can’t take a pencil to paper. It’s really more of an instinct, I think, than anything else".  Montagu Norman, Governor of the Bank of England said in 1930: "I don't have reasons, I have instincts". For a country to have a high level of per capita GDP, this primeval yearning for power needs to be contained.

The first ring of containment is the checks and balances in the political system (e.g. converting the Bank of England into an inflation targeting central bank with dispersed power in the Monetary Policy Committee). A good financial system constitutes the second ring of containment that checks such impulses, that induces better decisions by the political masters.

From an Indian perspective, checks and balances are the essence of the growth journey. The first ring of containment is relatively well accepted (Kelkar & Shah 2022). More attention is required upon the second: a financial markets system that would induce checks and balances, that would matter enough to reduce the incidence of mistakes in public policy.

Consider government borrowing. When government borrowing takes place as a set of acts between consenting adults, where voluntary lenders negotiate a price on the bond market, this creates the checks and balances in the episodes narrated above. In India, about 95% of government borrowing is mobilised coercively (Chitgupi et. al., 2024), which limits the role that the financial markets play in reshaping the incentives of the state. 

Consider the exchange rate. The checks and balances in the episodes narrated above involved a starring role for the exchange rate. When poor countries run a government controlled exchange rate, this channel of influence is limited [EiE Ep67 Floating exchange rate], which sustains poverty.

In India, a disproportionate burden of adjustment falls upon the equity market as other markets adjust less.

In today's mainstream thinking, financial development is seen as integral to the journey of economic development through its allocative function.  `Finance is the brain of the economy', `Wall Street tells Main Street what to do'. The financial system should occupy `the commanding heights of the economy' and make all the detailed allocative decisions about firms, technologies or industries which receive investment [EiE Ep21 The beauty of finance]. A good financial system performs the allocative function better than `industrial policy' can [EiE Ep89 Industrial policy]. 

But finance plays another important function as well: that of reshaping the checks and balances of the state, or being the second ring of containment for power. The second ring of containment matters most when the first ring of containment -- checks and balances of the political system -- falters. These two lines of reasoning encourage us to place financial sector development at the centre of the growth journey [EiE Ep57 How to do development].

There was a time in India when we were making progress in building a financial system. This has faltered (Shah 2023;  EiE Ep71 The Journey of Finance). We need to get back to the knowledge building and community building that began in the early 1990s in this field.

Balancing Power and Accountability: An Evaluation of SEBI's Adjudication of Insider Trading

by Natasha Aggarwal, Amol Kulkarni, Bhavin Patel, Sonam Patel, and Renuka Sane.

Insider trading is considered to undermine the fairness of the market and erode investor confidence. The Securities and Exchange Board of India (SEBI) has, in recent years, increased its focus on, and intensified its enforcement of, insider trading cases. Expanding enforcement actions should prompt a deeper examination of how effectively SEBI is performing this function vis-a-vis the "rule of law". Adherence to the rule of law by the regulator promotes transparency, creates a stable and predictable environment for businesses and individuals and builds public trust in the regulatory system. Regulatory actions need to be evaluated on benchmarks grounded in legal theory and the extant legal framework.

In a new working paper, Balancing Power and Accountability: An Evaluation of SEBI's adjudication of Insider Trading, we evaluate SEBI's orders on insider trading cases over a 15-year period (2009 - 23) as well as the performance on these orders in appeal before the Securities Appellate Tribunal (SAT). We develop an evaluation framework based on elements of the rule of law applicable to regulatory adjudication, with 56 indicators for SEBI orders, and 82 indicators for orders of the Securities Appellate Tribunal (SAT).

This paper addresses three critical questions:

• What do SEBI's enforcement actions look like, and how have they evolved over the years?

  SEBI's annual reports provide some broad data about the total number of enforcement actions undertaken in a year, but do not provide details of the type of enforcement actions taken for each type of violation, the particular legal or regulatory provision alleged to have been violated, or the impact of successful enforcement actions in reducing instances of insider trading.

  Our dataset comprises 320 SEBI orders - 255 orders are by Adjudicating Officers (AOs) and 65 are by Whole-Time Members (WTMs). Each order can contain cases against multiple entities - we call them alleged violators. The 320 orders contain a total of 912 alleged violators. SEBI officers have imposed sanctions on 565 of the 912 alleged violators (62% of the alleged violators). AOs and WTMs have imposed penalties in 336 cases and 82 cases respectively. The median penalty amount for AOs is about Rs. 7.8 lakh, and for WTMs is about Rs. 15 lakh. Only WTMs, and not AOs, have the power to impose debarment and disgorgement. We observed that they have imposed disgorgement in 144 cases, and debarment in 192 cases. The average disgorgement amount is Rs. 46 crore, while the median is only Rs. 1 crore. The average period of debarment is 3 years, and a median of 1 year.

  Our paper illustrates the number of insider trading orders issued between 2010 and 2022. This shows that a spike in orders on insider trading from 2017, and then again in 2019. There has been a slight drop in the number of WTM orders in 2022. This is consistent with statements in the SEBI annual reports, which suggest that insider trading has been high on the regulator's agenda.

• Are SEBI's orders consistent with the requirements of procedural and substantive rule of law requirements?

  The procedural rule of law measures are based on administrative law and natural justice principles, and deal with how SEBI has been performing in terms of procedural fairness while adjudicating insider trading matters. One aspect of procedural fairness is that the orders should include certain basic information. We find several shortcomings in providing factual information on basic rule-of-law indicators. First, several orders do not mention basic facts about the case such as the date of show cause notice (7%), period of investigation (17%), period of UPSI (27%), and a description of UPSI (20%). Second, orders do not cite precedent. We find that about 87% of orders do not cite any previous AO or WTM order. Finally, the orders do not specify the full details of the sanctions imposed. In 12% of cases where disgorgement was ordered, the time period for payment was not specified. Similarly, for both penalties and disgorgement, interest rate was not specified in a large number of cases.

  The substantive rule of law measures are based on the law relating to insider trading. These dive a bit deeper than the procedural requirements, and examine whether the orders satisfy the requirements of applicable law and regulation. For example, a key component of a good order on insider trading should be that SEBI has been able to clearly demonstrate that the violator is an insider. We find that SEBI has identified a clear insider relationship in only 335 (60%) of its orders. In the remaining 230 orders, it has described a connection in 152 (66%) orders. Describing a connection is not as clear as specifying the connection. If we were to give SEBI the benefit of the doubt and consider it as an acceptable description, even then, in 14% of the cases SEBI has failed to provide any explanation on how a person is an insider

• How do SEBI's insider trading orders stand up to challenge before the Securities Appellate Tribunal (SAT)?

  Our analysis resulted in a set of 119 cases in the SEBI and SAT datasets. These cases result in 183 appeals (32%) out of the total 565 cases with sanction. Out of these, 97 (53%) were allowed, partly allowed, or remanded, while 86 (47%) were dismissed. This suggests that once appealed there is a 50% chance that the SEBI order will not hold in appeal.

  We find that the higher the sanction, the higher the proportion of appeals. 38% of AO cases and 17% of WTM cases with a penalty amount higher than Rs. 10 lakhs resulted in an appeal, relative to 22% of AO cases and 5% of WTM cases below Rs. 10 lakh. This is more pronounced in the case of debarment and disgorgement, where appeals are present for more than half the cases with higher sanctions. We also find that it is less likely that an AO or WTM case with penalty above Rs. 10 lakh or debarment for more than one year will be modified in appeal. 79% of WTM cases involving higher disgorgement amounts and all WTM cases involving a penalty below Rs. 10 lakh were modified in appeal.

Regulatory enforcement actions are necessary to ensure that those who violate the law face consequences, and may also have a deterrent effect on others. However, there are adverse consequences if these actions emerge from a flawed process, or if the actions taken are arbitrary or disproportionate. SEBI is ahead of other Indian regulators such as the Reserve Bank of India in at least publishing its orders. An appeal rate of between 30-38%, and a win rate of 50% at the SAT could be further improved by investments in order writing, and by re-evaluating the regulations on insider trading.

The authors are researchers at the TrustBridge Rule of Law Foundation.

Announcements

Socratic dialogues on cities, cooperation

Polekon is organizing socratic dialogues on 'The functional order of cities' and 'The architecture of cooperation'.

Also, a new cohort of political economy of development - a 4-week workshop on economic development - is starting April 5th.

About socratic dialogues

Socratic dialogues are guided conversations where participants explore ideas, develop habits of critical thinking and practice effective habits of communication.

This is a unique kind of conversation where asking "why?" isn't confrontational but rather opens a path to deeper understanding. Through sustained, structured dialogue, participants develop not just knowledge but the habits of mind essential for clear thinking - careful listening, precise speaking, examining assumptions, and tracing the roots of their opinions.

The functional order of cities

Cities shape our daily lives in profound ways, yet the principles that make them vibrant or lifeless, safe or dangerous, remain poorly understood. This program brings together two of the most insightful critics of urban planning and state simplification - Jane Jacobs and James C. Scott - to explore what makes cities work, why certain forms of planning fail, and how we might better balance the needs for both spontaneous vitality and planning in our cities.

Time: 5pm - 7pm
Dates: Sundays, April 12, 19, 26 and May 3, 2025
Learn more

The architecture of cooperation

There's a tendency to attribute all that is orderly to laws and legislations that must have made it so, and similarly attribute all that is disorderly to their absence or weak enforcement. But the machinery that enables the deep cooperation that is the defining characteristic of modern life has multiple gears; it is a mistake to attribute ubiquitous honesty to the single lever of state power.

We'll explore the architecture of cooperation - the hierarchy of instincts, norms and formal institutions that support cooperation in our modern world.

Time: 5pm - 7pm
Dates: Sundays, April 13, 20, 27, May 4 and 11, 2025
Learn more

Political economy of development

The workshop blends theory and history to provide a framework for thinking about India's economic development. It starts with the basics of economic growth, examines India's development path, and contrasts it with Taiwan, one of the rare success stories of the 20th century.

The full course outline is available on the course platform. Learn more about the workshop here.

Announcements

Call for Proposals: VizChitra 2025

A Space to Connect and Create with Data

27th-28th June 2025, Bangalore

Data visualization practitioners in India are spread across different communities. VizChitra 2025 aims to bring them together through a first-of-its-kind conference. The goal is to build a community of diverse, interdisciplinary individuals working across the visualization spectrum and facilitate learning and connections between people from different industries and disciplines who share a common interest in the power of data and storytelling.

VizChitra's Mission

• Consider & Curate: Build a rhythm of curated events to spread the practice of data visualization.
• Cultivate & Care: Nurture a fertile space for learning & sharing of data visualization skills.
• Create & Collaborate: Express and co-create to push the boundaries of data visualization.

Conference Details

Conference Day

Date: 27th June 2025
Venue: Bangalore International Centre (BIC), Domlur
Format: In-Person & Live Stream

Workshop Day

Date: 28th June 2025
Venue: Across Bangalore, Karnataka
Format: In-Person Only

Who should attend?

Individuals from diverse disciplines engaged in data visualization, including:

• Communication & Design Roles: Journalism, Non-profits & Think Tanks, Media, Design Teams (UX, UI, Interfaces).
• Functional Roles: Business Intelligence, Data & Analytics, Marketing Comms, Planning.
• Domain-Specific Vis Roles: Public Policy & Planning, Sports Analytics, Healthcare Analytics, Legal, Fintech.
• Researchers & Academia Roles: Information Visualization, Human-Computer Interaction, Scientific Communication.
• Tool Builders & Creators: Data viz tool makers, Dashboard designers, Analytics & AI tools.

Submission Themes

1. Explain & Learn

• Process & practices of dataviz
• Storytelling & structuring narratives
• Aesthetics & design principles
• Accessibility, ethics & inclusion in dataviz
• Unique works by Indian practitioners

2. Explore & Play

• Dashboard & interaction principles
• Domain-specific data visualizations
• Collaboration & conversational interfaces
• Scalable data exploration processes
• State of data in India (availability, collection, etc)

3. Imagine & Innovate

• Usage of AI & technology in data visualization workflows
• Emerging mediums e.g. 3D, AR/VR
• Beyond viz e.g. sonification, physicalization
• Experiential viz e.g. data art, installations

Session Formats

• Standard Talk (30 min: 25 min presentation + 5 min Q&A) - Deep dives into complex topics with insights and personal learnings.
• Lightning Talk (15 min: 12 min presentation + 3 min Q&A) - Quick, impactful presentations on novel concepts or solutions.
• Unconference / Birds of a Feather (BOF) Session (45 min) - Community-driven discussions on shared interests and challenges.
• Hands-on Workshop (Half-day: 3 hours / Quarter-day: 1.5 hours) - Immersive learning experiences with direct guidance.
• VizChitra (Alternative) Session - Have an idea that doesn't fit the above formats? Pitch it to us!

Submission Guidelines

Submission guidelines: https://hasgeek.com/VizChitra/2025/sub

The call for submissions closes on 15th April 2025, 11:59 PM. Selections will be made on a rolling basis.

Join us in shaping the future of data storytelling in India: https://vizchitra.com/

Pumped storage plants in India: assessing policies and progress

by Upasa Borah, Chitrakshi Jain and Renuka Sane.

The transition to renewable energy faces challenges related to intermittency and variability in energy availability. Energy storage systems (ESS) play a crucial role in addressing these issues by storing excess renewable energy (RE) during periods of low demand and releasing it during peak hours. This enhances the scalability of renewable energy systems worldwide, reducing reliance on fossil fuels and supporting the integration of renewables into the grid. ESS technologies enable the conversion of electricity into other forms of energy for storage and later use. Among these, pumped storage plants (PSPs) remain one of the oldest and most widely relied upon solutions. These are adaptations of conventional hydropower plants.

India has set a target to achieve 50% cumulative installed capacity from non-fossil fuel-based energy resources and to reduce the emissions intensity of its GDP by 45% by 2030. India has also seen policy changes in ESS over the last few years. Legal recognition to ESS was granted in 2022, and new policy guidelines for PSPs were notified in 2023. The Central Electricity Authority (CEA) has estimated the storage capacity requirements, which will enable greater integration of renewable energy sources. These include 26.69 GW of pumped storage capacity and 47 GW of battery energy storage system (BESS) capacity by 2031-32. Among the two commercially viable technologies, BESS and PSPs, the latter present several advantages. Batteries are restricted by their storage capacity and their lifespan, and will have to be replaced frequently. PSPs, on the other hand, have the longest service life of 50 to 150 years and can store and generate energy on a much larger scale.

Given the importance of ESS and PSPs for India's energy transition, our recent paper titled "Pumped Storage Plants in India: Assessing Policies and Progress" presents the evolution of policy on PSPs and their performance in India.

The paper addresses the following questions:

• Where do PSPs feature in the overall storage policy?
• How many PSPs are under various stages of development? How many are eventually being completed?
• Are the policy measures encouraging the private sector to participate in the development of PSPs?
• Is the stated requirement of adding 26.69 GW of PSPs storage capacity by 2032 likely to be completed in the current context?
• What lessons from our experience of executing hydropower projects are relevant for the development of PSPs?

To study these questions, it builds a dataset of PSP projects from the information published by the Central Electricity Authority (CEA) and the CapEx dataset maintained by the Centre for Monitoring Indian Economy (CMIE).

Our analysis finds that the policy environment has become conducive to the development of energy storage systems in general and PSPs in particular. The participation of the private sector in the development of PSPs has increased considerably since 2018. Out of the 130 GW capacity that is under various stages of planning, 102 GW is being developed by the private sector. However, the ratio of projects which receive concurrence and are eventually completed remains low. Of the 91 projects in the dataset, 17 are under implementation, and six have been completed. The completed projects account for 3.3 GW of storage capacity. The low ratio of PSPs that are completed, combined with the experience of delay in executing hydropower projects, implies that the requirements of storage capacity addition from PSPs by 2026-27 and 2031-32 will be met only if the capacity under planning is realised and the projects are completed within six years.

The authors are researchers at the TrustBridge Rule of Law Foundation.

A guide to writing good regulatory orders

by Natasha Aggarwal, Bhavin Patel and Karan Singh.

India has several regulators that are vested with quasi-judicial powers and that play a pivotal role in economic governance. In exercising their quasi-judicial functions, regulatory orders must: (i) demonstrate compliance with the principles of natural justice, (ii) establish legitimacy by showing how they are taken strictly in accordance with, and to the extent authorised by the governing law, and (iii) be accountable, by ensuring that all the information an appellate authority may require for its evaluation of the regulatory action is clearly documented.

Regulatory orders significantly impact market participants and public trust. In particular, four sets of stakeholders are impacted by regulatory orders: (i) parties involved in the enforcement proceedings, (ii) the regulator itself, (iii) appellate and review fora, and (iv) the market and the general public. However, deficiencies in reasoning, structure, and clarity in quasi-judicial orders often undermine regulatory legitimacy and efficiency, leading to diminished stakeholder confidence. Moreover, arbitrary orders that do not demonstrate application of mind can be challenged or overturned or remanded in appeal. Such challenges, overturns, and remands lengthen the enforcement process and increase costs for all those involved. They also take away from the certainty of regulatory orders and affect the predictability of the law. Regulatory certainty and predictability are important requirements of the rule of law and are critical for the smooth functioning of markets.

The need for regulatory orders to be well-reasoned is recognised in Indian law. In a recent paper, titled "A guide to writing good regulatory orders", we propose a method of structuring regulatory orders that would aid readability, strengthen the logical flow of arguments, and enhance the accessibility and transparency of regulatory orders. In particular, we identify four sets of requirements for better order writing: informational, structural, substantive, and stylistic. Broadly, the information requirements relate to identificatory and citatory information that should appear in orders, and to information that helps establish that procedural requirements have been complied with, such as dates of Show Cause Notices. Structural requirements relate to the logical arrangement of the contents of orders in a manner that aids reading and comprehension, and which strengthens regulatory arguments. The substantive requirements help establish that all the requirements of the substantive law applicable to the matter discussed in the order have been addressed. Finally, our suggestions on stylistic requirements include the use of plain language and writing styles that are accessible and comprehensible to all affected persons.

We propose to conduct further studies on how the suggestions in this paper may be implemented through tools and technologies that could augment regulatory capacity for order writing.

The authors are researchers at the TrustBridge Rule of Law Foundation.

Evaluating India's Customs Authority for Advance Rulings (CAAR) and charting a path for reform

by Vijay Singh Chauhan, Prashant Narang, and Monika Yadav.

Advance rulings are critical for trade facilitation - they offer clarity on tariff classifications, customs duties, and valuation, enabling importers and exporters to navigate complex regulatory environments with confidence.

India's journey with advance rulings began in 1999 with the establishment of the Authority for Advance Rulings (AAR), which handled both direct and indirect tax matters. However, the AAR faced severe criticism for its procedural inefficiencies and delays. As one senior customs consultant quoted in the paper noted, "We had cases pending for 4-5 years, forcing many businesses to abandon their plans entirely." The centralised structure, with its single Delhi office, created substantial logistical challenges for businesses across India.

In response to these shortcomings, the Customs Authority for Advance Rulings (CAAR) was introduced in 2018 under Chapter VB of the Customs Act, transforming India's framework from a judicial model to a quasi-judicial one led by senior customs officers. This reform aimed to leverage domain-specific expertise and decentralise operations with benches in Delhi and Mumbai.

However, has CAAR succeeded in delivering timely and consistent rulings, and how does its performance measure up against international benchmarks?

In our recent paper, “Decoding CAAR: Insights, Challenges, and Pathways for Reforms”, we critically assess CAAR's performance between January 2021 and August 2024. Our mixed-methods analysis combining stakeholder interviews with quantitative evaluation of 414 advance rulings uncovers systemic inefficiencies impeding CAAR's effectiveness, notably delays beyond the statutory 90-day timeframe and inconsistencies from limited nationwide applicability.

Despite improvements over its predecessor (AAR), CAAR remains burdened by procedural bottlenecks - chiefly, dependence on port commissioners for technical inputs, uneven workload distribution, and outdated manual processes. Drawing comparisons with jurisdictions like the U.S., Canada, and Australia, we propose actionable reforms: establishing dedicated in-house technical expertise, adopting AI-driven case management systems, and ensuring the nationwide and indefinite applicability of rulings.

By identifying critical gaps and presenting pathways for reform, our research seeks to align CAAR with global standards -essential for strengthening India's role as a reliable global trade partner.

Measuring CAAR's performance: The 90-Day challenge

A central finding of the research is that CAAR struggles to meet its statutory obligation to issue rulings within 90 days. The analysis of rulings issued between January 2021 and August 2024 reveals that only 46.2% of decisions were delivered within this mandated timeframe. This compliance rate varies dramatically among officers, with one achieving 86.1% compliance while another managed just 2.2%.

The primary bottleneck identified is CAAR's dependence on port commissioners for technical inputs. Although regulations allow commissioners just two weeks to provide comments, these responses are often delayed, extending the ruling process by months. As one CAAR presiding officer acknowledged in an interview, delays frequently occur when "comments from jurisdictional commissioners are not received on time," leaving officers with "no option but to delay further".

Some CAAR officers have developed informal practices to mitigate these delays, including sending reminders, making personal phone calls, and issuing demi-official letters. However, these efforts reflect systemic inefficiencies rather than sustainable solutions. The research also highlights the CAAR's reluctance to issue ex parte rulings (without port commissioner input), despite having the authority to do so under Regulation 8(8) of the CAAR Regulations, 2021.

Port-specific applicability: A self-imposed limitation

Another significant limitation is the port-specific applicability of rulings. Unlike systems in the United States, Canada, and Australia- where advance rulings apply nationwide - CAAR rulings are binding only at the specific port where they're issued. This creates inconsistent enforcement across India's customs jurisdictions, forcing businesses that import through multiple ports to seek separate rulings for identical goods.

One respondent articulated this frustration: "Rulings should be consistent across all ports. My classification should not fall under X at one port and Y at another". This limitation not only increases administrative burdens but also undermines the predictability that advance rulings are designed to provide.

The temporal restriction of rulings to a three-year validity period further compounds these challenges. Globally, countries adopt more flexible approaches - Australia's rulings remain valid for five years, while those in Canada and the U.S. have indefinite validity unless there are changes in law or circumstances. As one participant noted, "Unless there is a change in the product or technology, limiting advance rulings to three years seems unnecessary".

Workload imbalance: The Mumbai-Delhi divide

The research reveals significant disparities in workload distribution between CAAR's two benches. The Mumbai bench handles substantially more cases (256) than Delhi (158), with Maharashtra alone accounting for approximately 37.11% of Mumbai's workload. This concentration of cases in Mumbai is followed by Tamil Nadu (31 rulings, 12.11%) and Karnataka (27 rulings, 10.55%), with these three states collectively accounting for about 59.77% of Mumbai's workload.

In contrast, Delhi's jurisdiction shows a different distribution pattern, with Delhi (NCT) itself accounting for 54 rulings (34.18%), followed by Haryana (23 rulings, 14.56%) and Uttar Pradesh (9 rulings, 5.70%). These regions together contribute approximately 54.43% of Delhi's total caseload. The Mumbai bench also faces the additional challenge of 75 orders lacking specified applicant addresses, which further complicates case management.

While both benches experience procedural bottlenecks - such as delays in receiving feedback from jurisdictional commissioners - the Mumbai bench appears disproportionately burdened, given its coverage of the economically significant regions of Western and Southern India. The paper acknowledges this workload imbalance but, rather than recommending additional benches, focuses on process-oriented solutions discussed below.

A path forward: Recommendations for reform

The paper proposes several actionable reforms to enhance CAAR's efficiency and alignment with global best practices:

1. Transition to a Technical Unit Model - Establish in-house technical expertise through dedicated classification specialists and valuation analysts, modeled after systems in Australia, Canada, and the U.S. Pilot at one bench first, with performance measured through turnaround times and stakeholder feedback.
2. Digital Process Optimisation - Implement AI-driven case management using Large Language Models (LLMs) to auto-generate case briefs and identify classification issues. Develop long-term AI solutions integrating HS codes, trade agreements, and global tariff jurisprudence.
3. Nationwide Applicability of Rulings - Amend Section 28J(1)(c) of Customs Act to mandate uniform enforcement across all Indian ports, eliminating jurisdiction-specific inconsistencies.
4. Extending Ruling Validity - Introduce auto-renewal mechanism maintaining rulings' validity unless material facts or trade laws change, reducing business compliance burdens.
5. Enhanced Transparency and Accountability - Create real-time performance dashboard tracking case disposal rates, 90-day compliance, appeal rates, and ruling consistency while maintaining necessary confidentiality.

Implications for India's trade ecosystem

The study's findings have significant implications for India's position in global trade networks. While CAAR represents progress compared to its predecessor, systemic inefficiencies continue to hinder its full potential. Addressing these challenges is crucial not only for domestic traders but also for strengthening India's reputation as a reliable trade partner internationally.

The research highlights an encouraging statistic: more than two-thirds of CAAR rulings align with the applicant's proposed position. This suggests that when the system functions effectively, it provides valuable certainty to businesses. However, the procedural bottlenecks identified in the study prevent this benefit from being fully realised.

As global trade regulations evolve and become increasingly complex, ensuring that CAAR remains agile and responsive is critical to sustaining India's economic growth. The reforms proposed in this paper offer a roadmap for enhancing the efficiency and relevance of advance rulings within India's broader trade facilitation framework.

Conclusion

This process audit of India's Customs Authority for Advance Rulings (CAAR) provides a rigorous assessment of its strengths and limitations. The study effectively documents progress since transitioning from AAR while identifying persistent operational inefficiencies, particularly the 90-day timeline compliance challenge, port-specific applicability constraints, and the technical expertise gap compared to global benchmarks.

For policymakers and trade stakeholders, this research offers a clear roadmap to transform CAAR. The evidence-based recommendations target critical friction points in CAAR's workflow: establishing in-house technical expertise to reduce dependence on port commissioners, implementing AI-driven case management, expanding nationwide ruling applicability, and extending validity periods. These practical reforms align with international best practices observed in jurisdictions like the United States, Canada, and Australia.

Here is the link to the paper.

Vijay Singh Chauhan is a Executive Director at Deloitte Touche Tohmatsu India LLP, Prashant Narang and Monika Yadav are researchers at the TrustBridge Rule of Law Foundation.

Author: Akshay Jaitly

Akshay Jaitly is Co founder Trilegal and Co founder Trustbridge Rule of Law Foundation.

On this blog:

• Electricity reforms in the economic strategy of Tamil Nadu, 7 March 2025.
• Improving electricity regulation in Tamil Nadu, 9 February 2025.
• Offshore wind in Tamil Nadu: from potential to reality, 13 January 2024.
• The difficulties of asset monetisation in the transmission sector, 9 January 2024.
• Reducing challenges to arbitration awards: lessons from court data, 26 October 2023.
• Threats to legal certainty in government contracting by electricity distribution companies, 10 June 2022.
• Implications of free transmission of renewable energy, 19 April 2022.
• Energy transition investment in India and in the world, 30 March 2022.
• The lowest hanging fruit on the coconut tree: India's climate transition through the price system in the power sector, 19 November 2021.

Electricity reforms in the economic strategy of Tamil Nadu

by Akshay Jaitly, Renuka Sane, Ajay Shah.

Electricity is important for economic growth and for India's path to decarbonisation. The field of electricity is deeply sub-national; conditions in each state are different and require ground-up thinking. In a new working paper, Electricity reforms in the economic strategy of Tamil Nadu we make the following arguments:

1. Electricity investments in Tamil Nadu have faltered, and the lack of electricity availability could hamper growth. Tamil Nadu used to be the leader in renewables investments, but these have stalled in recent years.
2. The argument that the state electricity system could just buy electricity -- and doesn't need to generate it -- has limitations. If the discoms find it difficult to pay investors on time, they will likely have difficulties paying out-of-state generators on time as well, and those firms will be swift to cut off supplies. Also, there have been instances when state governments have banned the sale of electricity to out-of-state buyers. Such events impede the purchase of electricity from out-of-state when the market is tight.
3. Given that Tamil Nadu is an export-oriented economy, renewables are an important part of its economic strategy, because exporters are shaped by ESG investments and by carbon border taxes.
4. The status-quo is coming under stress. There are feedback loops through which C&I exit reinforces C&I exit, which undermines the financial viability of the discom.
5. The future of the energy system requires a great wave of investment and risk-taking. What is required is a process of discovery, and not design, where profit-motivated private persons peer into the future, speculate about what might work, and take risks in building businesses that constitute bets about certain technologies and business models. This process requires investibility in the Tamil Nadu electricity system.
6. The problem of electricity is not just a narrow problem within the energy sector; in Tamil Nadu it rises to a greater materiality within the overall economic growth strategy.

The paper offers a feasible and practical path to solutions.

The Blind Spot in Indian Arbitration: Fees, Power, and Structural Oversights

by Prashant Narang and Vishnu Suresh.

In India, when parties fail to agree on the composition of an arbitral tribunal, courts intervene and appoint retired judges as arbitrators, who unilaterally determine their own fees-without the consent of both parties. This process, known as "ad hoc" arbitration, has led to concerns about excessive charges. While no comprehensive dataset proves a systemic pattern of exorbitant fees, recurring judicial and committee observations suggest that the issue is widespread enough to warrant closer scrutiny. The Indian policy response has been to implement some form of fee regulation for such arbitration.

This article presents a history of the Indian policy thinking on arbitrator fees and presents an argument about why fee regulation alone may not remedy the structural inefficiencies in ad hoc arbitrations dominated by retired judges. Judges who design (or are expected to design) and implement arbitration appointment rules often later serve as arbitrators themselves, benefiting from these same rules - or the lack thereof - post-retirement. Even when they do not directly benefit, enforcing such rules against fellow judges, particularly their seniors in the profession, is challenging given the inherently hierarchical nature of the legal fraternity.

The article argues that the current fee regulation approach further entrenches judicial control over arbitration rather than reducing it. By deepening the judicialisation of the arbitration process, it raises further concerns about perpetuating systemic inefficiencies. At the same time, we explore whether a more fundamental shift towards institutional arbitration - centred on dejudicialisation and the decoupling of the judiciary from arbitration - is necessary to create a cost-effective, competitive, and independent arbitration ecosystem in India.

The evolution of the debate on arbitration fees

Concerns about high fees in arbitration were explicitly raised by the Supreme Court in Union of India v M/s Singh Builders Syndicate (2009) 4 SCC 523. The Supreme Court reiterated its concerns in Sanjeev Kumar Jain v Raghubir Saran Charitable Trust (2012) 1 SCC 455, acknowledging that high arbitration costs discouraged parties from opting for arbitration.

This focus on high fees has meant that Indian policy response has also relied on mandating "fee schedules" for tackling the problem. This is consistent with other jurisdictions as well. For example, Germany prohibits arbitrators from unilaterally deciding their own fees on the ground that it violates the prohibition on in rem suam decisions (i.e., ruling in one's own cause). Austria and Switzerland likewise disallow arbitrators to issue binding and enforceable orders regarding their own remuneration. Italy permits arbitrators to fix fees in the absence of explicit party agreement, but these fees only become binding after the parties themselves consent. Singapore, lacking a written fee agreement, lets a disputant seek assessment of fees by the Registrar of the Supreme Court under the Supreme Court of Judicature Act, 1969.

The Indian policy response

The key elements of the Indian response are as follows:

1. The Fourth Schedule under the 2015 Amendment: The 246th Report of the Law Commission of India (2014) recommended a structured fee schedule to bring uniformity to arbitration costs. This led to the introduction of the Fourth Schedule under the Arbitration and Conciliation (Amendment) Act, 2015, which provided a model fee framework for arbitrators in ad hoc arbitrations. In addition, it also inserted a provision empowering high courts to make rules for fee determination in case of domestic ad hoc arbitration.
2. Shifting towards institutional arbitration under the 2019 Amendment: The Arbitration and Conciliation (Amendment) Act, 2019 introduced a framework that shifted appointment powers from courts to arbitral institutions. The amendment required the Supreme Court and High Courts to designate arbitral institutions for making appointments under Section 11, rather than appointing arbitrators directly. The amendment goes a step further and creates a fallback mechanism for jurisdictions where graded arbitral institutions are not available. In such cases, the High Court Chief Justice can maintain a panel of arbitrators who effectively function as an arbitral institution. These empanelled arbitrators must follow the Fourth Schedule's fee structure, creating a hybrid between institutional and ad hoc arbitration. However, this part of the 2019 amendment is not notified yet.
3. Alternative fee arrangements by the TKV Report, 2024: In June 2023, the Ministry of Law and Justice constituted an expert committee, chaired by former Law Secretary T.K. Vishwanathan, to review arbitration costs and propose amendments to the Arbitration and Conciliation Act, 1996. The T.K. Vishwanathan Committee Report, 2024 identified multiple shortcomings in the existing Fourth-Schedule fee framework, most notably the reliance on "claim quantum" as the primary basis for calculating arbitrator fees. Such a simplistic approach, the Report argued, neglected case complexity and procedural variations: for instance, an ostensibly small claim requiring extensive oral evidence or expert testimony can command more arbitrator time than a large claim resolved on documents alone. In response, the TKV Report advocated Alternative Fee Arrangements (AFA), emphasising value-based pricing that accounts for factors like complexity, time, and potential cost savings. Most notably, the TKV Report suggested eliminating Section 11A and the Fourth Schedule entirely, replacing them with a more flexible framework in which the Central Government would prescribe fee structures through rules.
4. The Draft Arbitration and Conciliation (Amendment) Bill, 2024: This draft bill empowers the Arbitration Council of India (ACI) as a proxy for the Union Government to specify arbitrator fees. Under the Bill, the Fourth Schedule would be deleted, and Section 11A would be revised so that the ACI could determine fees, except where parties have explicitly negotiated their own fee arrangement or are using an arbitral institution with its own fee rules. Another significant change is the removal of the Chief Justice's consultative power in the appointment of ACI's governing board, shifting oversight from judicial control to greater executive control of the arbitration regulatory body.

Why the fee regulation approach has fallen short

Before we analyse the reasons for the failure of the 2015 amendment and the Fourth Schedule, it is useful to describe the political economy that confronts any policy change on arbitration: namely, the near-monopolistic environment created by a small group of retired judges who often command premium fees and face minimal accountability. Courts retain the ultimate power to appoint arbitrators under Section 11, and this process frequently involves the same cadre of retired judges who benefit from the laxity of fee caps. The entire appointment and fee determination process is still largely vested in the judiciary. Given that many judges become arbitrators upon retirement, they have little incentive to enforce rigorous fee caps that might constrain their own future earnings. This fundamental public choice problem has been frequently documented, including by the Vice-President's observation that "nowhere in the world is arbitration in such tight fist control as in our country".

The ONGC v Afcons Gunanusa JV (2022) provides a telling example of how court-appointed arbitrators can exploit their position. Despite initially accepting a contractual fee cap of Rs. 10 lakh per arbitrator, the tribunal - composed of retired Supreme Court and High Court judges - unilaterally enhanced their fees multiple times. They first sought adoption of the Fourth Schedule's more generous framework, then further increased their fees citing case complexity, and even attempted to apply these increases retrospectively. When ONGC, a public sector enterprise subject to audit scrutiny, refused to pay the enhanced fees, the arbitrators recused themselves, forcing the matter back to court. The Supreme Court ultimately had to terminate the tribunal's mandate, highlighting how the current system enables arbitrators to leverage their position to demand higher fees with limited accountability.

This reality was not addressed by the 2015 amendment. While the Fourth Schedule was introduced precisely to limit excessive fees, it was neither made mandatory nor accompanied by a robust enforcement mechanism. As a result, it did little to disrupt the underlying political economy that sustains high-cost ad hoc arbitration. In fact, it risked consolidating judicial influence rather than attenuating it, especially since it granted High Courts the discretion to frame their own fee rules, ultimately placing regulatory power over arbitrator remuneration in the hands of those who may later serve as arbitrators themselves.

Moreover, this one-size-fits-all imposition overlooked regional variations and pre-existing institutional successes. The Karnataka Arbitration Centre, for instance, already offered a more economical schedule capped at around Rs. 12 lakhs for disputes above Rs. 20 crores, whereas the Fourth Schedule ceiling reaches Rs. 30 lakhs based on the thresholds set by the Delhi International Arbitration Centre. Rather than drawing on such local expertise and diversity to foster competitive discipline, the reforms proceeded on a centralised model that did little to leverage market discovery or locally tailored fee structures. The Law Commission's proposals were more concerned with containing arbitrator fees than with dismantling the structural conditions (judicial appointments, confined arbitrator pools, discretionary rule-making by courts) that perpetuate high costs.

The subsequent 2019 amendment intends to reduce judicial intervention and promote institutional arbitration. It revised Section 11 so that courts could "designate" arbitral institutions for appointments. "Fallback" arrangements enable High Court panels of arbitrators - often the same retired judges or those close to the judiciary - to retain effective control over the process, with fee structures mandated by the Fourth Schedule.

Recent developments, including the constitution of a new committee chaired by T.K. Vishwanathan in 2023, reflect growing discontent with the rigid claim-quantum basis that underlies the Fourth Schedule. The TKV Report contends that arbitrator fees should account more flexibly for complexity, time, and the overall resources required. While the proposed reforms contemplate eliminating the Fourth Schedule, transferring fee-setting authority to the Arbitration Council of India, and moving towards executive rather than judicial oversight of arbitration rule-making, they too risk replicating hierarchical models unless accompanied by genuine plurality and transparency in the appointment of arbitrators and the choice of fee structures.

Ultimately, each successive round of reform, from the 2015 amendment and the introduction of the Fourth Schedule to the latest proposals from the TKV Report, has prioritised adjusting fee schedules over reducing systemic reliance on a narrow circle of retired judges. The 2019 amendment and its stillborn promise of institutional appointments is an exception. As a result, what begins as a nominal attempt at "dejudicialisation" typically ends in reaffirming the dominance of court-nominated arbitrators, with little recourse for parties subjected to escalating costs. The persistent gap between nominal regulatory interventions and the practical realities of enforcement serves as a stark reminder that fee caps and model schedules, however laudable, are unlikely to produce fundamental change unless the structural incentives and entrenched hierarchies that govern Indian arbitration are addressed in earnest. Indeed, the recurring inclination to concentrate power - first in the High Courts, now potentially in the central government which is also the largest litigant - overlooks the fundamentally decentralised ethos of arbitration, which thrives on party autonomy and market-driven checks.

The next chapter in arbitration reform: Evidence-based vs. assumption-driven reforms

India's ongoing journey toward arbitration reform reveals a classic illustration of the "knowledge problem" that arises when policymakers attempt top-down interventions without robust, localised information. Observations from courts and committees certainly highlight inefficiencies - especially in court-appointed arbitrations that often lean on retired judges. Yet the absence of systematic, comparative data on whether these inefficiencies truly amount to a widespread market failure should give us pause before imposing sweeping fee controls or rigid schedules.

We must ask: do we need price caps because parties stuck in deadlock are unable to negotiate with court-appointed arbitrators? Or because retirees form a monopoly and pose barriers to entry? Excessive or poorly calibrated regulation can distort incentives and stifle innovation in arbitration services - problems that often follow when market-based processes are replaced by bureaucratic mandates. Fee ceilings, in particular, risk becoming a blunt tool that overrides local knowledge and decentralised experimentation. If parties truly had meaningful alternatives - like institutional forums or specialised arbitrators - they would naturally gravitate toward more cost-effective options, compelling fee discipline through competition rather than imposed caps.

Likewise, the unilateral fee determination by certain court-appointed arbitrators raises critical questions about capture - what might be called a narrowly "clubby" arrangement favouring a select group. But imposing top-down reforms in the absence of clear data on how widespread or severe this dynamic is invites "presumptive regulation". Such policy-by-assumption can inadvertently lead to higher costs, reduced choice, and entrenched favouritism - precisely the path we want to avoid.

By contrast, implementing the 2019 amendments and cultivating robust institutional arbitration offers a more polycentric and evidence-driven approach. This would expand the pool of competent arbitrators, reduce dependence on judge-led ad hoc appointments, and ultimately let competition, reputation, and local knowledge discipline fees. Notably, India's largest litigant - its own government - has already started shifting away from ad hoc arbitration, indicating that when parties sense an overcharge or imbalance, they do respond by seeking out better alternatives.

Before erecting rigid structures such as a universal Fourth Schedule, policymakers should verify that the alleged market failures cannot be resolved through the competitive process. Empirical, comparative research - analysing cost differentials between judge-led ad hoc arbitration and institutional arbitration - would illuminate whether exorbitant fees reflect a systemic shortcoming or isolated pockets of inefficiency. Only when we ground policy in such evidence can we ensure that reforms address real problems and do not accidentally lock in the very system they aim to correct.

Prashant Narang and Vishnu Suresh are researchers at the TrustBridge Rule of Law Foundation. We thank our colleagues Renuka Sane, Bhavin Patel, as well as two anonymous reviewers, for their comments.

Mapping insider trading laws: A database for SEBI’s Prevention of Insider Trading Regulations

by Natasha Aggarwal.

The Indian legal framework on insider trading is complex and has, over the years, been significantly updated and amended. The insider trading regulations were introduced in 1992 and amended four times between 2002 and 2011. This set of regulations was replaced by the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations), which has been amended 12 times between 2018 and 2024. Many of these amendments aimed to address regulatory gaps, such as those concerning the scope of terms like "connected persons" and "unpublished price sensitive information" (UPSI). However, frequent changes in the PIT Regulations have created challenges in understanding the correct position in law and in analysing past events and developments.

To help solve this problem, we have prepared a relational database by identifying the constituent elements of the violation of "insider trading" in the PIT Regulations. The database does not map changes to the disclosure requirements in the PIT Regulations.

The prohibitions under the PIT Regulations may appear straightforward but are often complex in practice and implementation. For example, understanding insider trading requires understanding (i) what constitutes UPSI, which in turn requires understanding what constitutes generally available information, and (ii) who is an insider, which in turn requires understanding the scope of terms such as "connected person", "deemed to be connected person", and "immediate relative". Moreover, certain regulated entities are required to adopt a code of conduct - a requirement that initially applied only to listed companies but now applies to entities such as mutual funds and intermediaries.

Based on the above, we have identified the following key definitions that require clarity for better compliance with, and understanding of, the PIT Regulations:

• Connected person;
• Deemed to be connected person;
• Insider;
• Immediate relative / relative;
• Trading;
• Unpublished price-sensitive information (UPSI); and
• Generally available information.

We have also identified the following violations of the PIT Regulations:

• Communication of UPSI
• Trading when in possession of UPSI; and
• Failure to implement or comply with the code of conduct.

These issues are referred to as 'Indicators' in our database.

We expect that this will be helpful for researchers and market participants to analyse the evolution of these indicators and the legal framework for insider trading. Our indicators are linked to: (i) related regulatory instruments, such as amendments (along with the date on which the amendment takes effect), SEBI's board meetings, consultation papers, and circulars, and (ii) provisions of the earlier insider trading regulations (i.e., the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 (1992 Regulations)).

For example, the definition of UPSI is mapped to an amendment in 2018, two consultation papers, two board meetings, and the provision of the 1992 Regulations that defined UPSI. This allows a user to map all documents in which an indicator has been discussed, and then understand and analyse: (i) the current legal position, (ii) the evolution of a definition or a violation, and (iii) the SEBI's reasoning in introducing certain amendments and the impact of specific documents, such as consultation papers, on regulatory provisions.

The database is available here. We encourage you to read the tab titled "Read me" to understand how to navigate this database.

We will update this to reflect any further changes to the PIT Regulations. If you notice any errors or inconsistencies, please reach out to us at info@trustbridge.in, and we will make the necessary corrections.

Natasha is a Senior Research Fellow at TrustBridge.

Improving electricity regulation in Tamil Nadu

by Akshay Jaitly, Charmi Mehta, Rishika Ranga, Renuka Sane, Ajay Shah and Karthik Suresh.

The Indian electricity sector is a centrally planned sector that faces increasing financial stress. In other words, a centrally planned decarbonisation would result in enlarged costs and political difficulties. The path forward for electricity reforms is to make changes one state at a time. We have started this journey with the state of Tamil Nadu.

The case of Tamil Nadu is particularly interesting. It holds great potential when it comes to the energy transition with high potential of offshore wind and solar. However, poor quality of supply along with indiscriminate subsidies for domestic and agricultural consumers has led to deep levels of fiscal stress on the Tamil Nadu state exchequer. Fiscal stress harms investibility in electricity, which is particularly a challenge for renewables. Due to multiple reasons, some of which may be attributed to the political economy at the state level, the state of Tamil Nadu has also revised tariffs only four times since the Electricity Act was enacted in 2003. These tariff revisions have often not reflected the cost of supply of electricity (e.g., the tariff revisions in 2017).

While the electricity sector in Tamil Nadu has recently undergone institutional changes in the form of TANGEDCO's demerger, the present state of regulatory challenges has not been adequately addressed. In a new paper, Improving electricity regulation in Tamil Nadu, we present evidence on regulatory failures of the electricity regulator in Tamil Nadu (TNERC) and contextualise the impact of this on associated aspects of public finance and private finance. We bring the knowledge of regulatory theory to bear upon the possible causes of these failures. We discuss the TNERC's performance on elements that make up a well-functioning regulator, such as clarity of purpose, separation of powers, selection of board members, fair adjudication, public consultations and financial independence.

Many aspects of regulatory reform require amendments to the Electricity Act, and hence the problem statement lies in identifying the levers available to make progress in Tamil Nadu. We identify several levers that the state government can use to undertake reforms, well within its powers under the Electricity Act, to make Tamil Nadu a turnaround story and a model for good electricity regulation nationwide. When these improvements are put into motion, they will materially change the views of private investors on the feasibility of investment in the Tamil Nadu electricity sector. This paper offers ideas on how this can be done.

Akshay Jaitly, Rishika Ranga and Renuka Sane are researchers at Trustbridge Rule of Law Foundation. Charmi Mehta, Ajay Shah and Karthik Suresh are researchers at XKDR Forum.