Sebi vs RBI
RBIs own Jane Street
As the song and dance about Jane Street and Sebi continues – most have forgotten why do we have regulators in the first place. The primary task of a regulator is to avoid market abuse. Second task is to avoid market failure. Third task is to maintain a level playing field. Then comes the usual socialist stuff like protecting consumers from exploiting capitalists and so on.
NBFCs are of two types in India – those that come under RBI such as the banks, fintech and non bank lenders. And others that come under Sebi such as AIFs. Sebi has a wider mandate than just AIFs and overseas all functions of the capital markets. Similarly RBI overseas currency controls and issuance. It is the job of both regulators to prevent the creation of cartels, monopolies and market manipulators. Sebi actually does a way better job than RBI. And they do so with far lower interference. RBI for example has had directors or overseers involved in pretty much every failed bank or NBFC. It is not just Yes Bank but also Reliance Capital or Srei that they have to take responsibility for.
However those are all dying institutions. Trustless systems like blockchain take away the single USP that banks were built on – TRUST. When there is no need for trust, there is no need for banks in the conventional sense of the word. There is risk – and in a trustless world, the only skill you need to have is around cyber security.
The new frontier is now fintech. And it is a matter of time before fintech subsumes legacy banking. RBI has to ensure that there is no cartelisation. Or monopoly creation or market failure. And RBI is yet to figure out how to do this.
Today, Phone Pay controls about 45-50% of the retail payments, by numbers, whereas GPay controls another 35 odd percentage.together they control between them about 85% of the retail payments in India. Individuals like you and me use them and Mom snd Pop shops use them extensively.
To some extent payment through them is also considered to be “anonymous” for small value payments. This is as close to “Cash” as you can think of !!
Both ofcourse are entirely owned by foreigners. Phone Pe by Walmart and GPay by Google. They have end-point controls at the customer end !! There was a move to limit their individual dominance to 30%, but that deadline has continuously been extended.
Is this another Jane Street and Citadel waiting to happen. Are you going to wait till one day they have held you to ransom.
Let’s take the case of Iran. When they had a fallout with the U.S. – adobe shut off access to pdf documents. Niether the govt nor the consumers were able to open pdf documents. Imagine if all your roc and income tax documents cannot be opened. Deepak Phatak my professor and hostel warden had highlighted the dangers of using adobe. And instead suggested we use some kind of open source but no one listened.
Do we see any similar lessons here
Some food for thought!!