New Delhi, Feb. 21 The capital market and insurance sector regulators — Securities and Exchange Board of India (SEBI) and Insurance Regulatory and Development Authority (IRDA) — are flouting Finance Ministry instructions by parking their surplus funds generated through fee charges, penalties, among other things outside the Government accounts.
This has been stated by the Comptroller & Auditor General of India (CAG) in its report on the Union Government accounts for 2007-08. The CAG had in its earlier reports also highlighted that SEBI and IRDA practice on parking of surplus funds were inconsistent with constitutional provisions.
As at end March 2008, sums aggregating to Rs 1,325.49 crore were parked outside the Government accounts. Of the Rs 1,325.49 crore, SEBI’s share stood at Rs 987.95 crore, with the balance Rs 337.54 crore relating to IRDA.
The CAG report for the Union Government accounts 2007-08 said the Finance Ministry had in January 2005 directed all ministries and departments of the Government to ensure that funds of regulatory bodies are maintained in the Public Account.
“Retention of funds by IRDA and SEBI outside government accounts is not only violative of government instructions, but is also inconsistent with the Constitutional provisions,” the CAG has said.
These bodies have been established by Acts of Parliament and are to be treated as “State” within the meaning of the expression used in Article 12 of the Constitution of India. The monies collected by these bodies, therefore, should be credited to the Government account under Article 266 of the Constitution of India, according to CAG.
While IRDA was specifically directed earlier by the Finance Ministry in July 2002 to deposit its funds in the Public Account, the CAG report noted that no such specific direction has been issued to SEBI despite their continued violation of the Government’s instructions.
The CAG has said the retention of funds by IRDA and SEBI outside government accounts is also not consistent with the accounting procedure followed by other similarly placed independent regulatory bodies such as Telecom Regulatory Authority of India, which are maintaining their accounts as part of the Government accounts.
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