Why the delay in key appointments?

The delay in appointing the insurance regulator and a deputy governor at the RBI to steer banking supervision is baffling, and a telling reflection of poor succession planning for crucial appointments in the financial sector. People retire on predetermined dates, not on the basis of surprise directives from some mysterious divinity. Succession plans and personnel selection must be ready well in advance.

S S Vijayan, former insurance regulator, demitted office on February 20, while S S Mundra, former RBI deputy governor in charge of banking supervision, superannuated in July last year. A portfolio re-allocation in the RBI notwithstanding, any delay in the appointment is capable of creating serious misgivings about the reasons behind it. Two members of the IRDAI were also selected after much delay. The dither in the selection of an insurance regulator is odd, at a time when the government wants to rope in insurers for its ambitious National Health Protection Scheme. The Financial Sector Regulatory Appointment Search Committee must complete the selection process soon to ensure smooth functioning of the insurance sector with assets under management of about Rs 30 lakh crore.

The banking sector is in a mess, and supervision must be beefed up. The finance ministry has sought fresh applications for the post of the deputy governor, with stress on domain knowledge and experience in supervision and compliance in the financial sector. Selection should be through a rigorous process that places a premium on merit and competence. In the US, for example, regulators are usually former market players who are well-versed in the game. The point is to ensure that the best person gets the job, given that good regulation calls for an in-depth understanding of the sector.