Q8. The product diversification of financial institutions and insurance companies, resulting in overlapping of products and services strengthens the case for the merger of the two regulatory agencies, namely SEBI and IRDA. Justify.
Model Answer:
Introduction
With the increasing diversification of financial products, there is a growing overlap between the offerings of financial institutions and insurance companies. This convergence of products—such as ULIPs (unit-linked insurance plans) that combine investment and insurance—creates regulatory challenges and duplication of oversight, strengthening the case for merging SEBI (Securities and Exchange Board of India) and IRDA (Insurance Regulatory and Development Authority).
Body
Justifications for a Merger:
- Streamlined Regulation: A unified body could prevent regulatory overlaps and conflicts, ensuring consistent standards and reducing compliance costs.
- Improved Investor Protection: Merging SEBI and IRDA could enhance investor protection by providing a single, transparent framework, especially in overlapping areas like investment-linked insurance products.
- Efficiency and Cost Savings: A single regulatory body would simplify administrative processes, improve resource utilization, and reduce redundancies.
Conclusion
While merging SEBI and IRDA has potential benefits, such a move would require careful planning to address unique industry needs and maintain regulatory effectiveness across diverse financial products.
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