Ipsita Dutta takes a look at clarifications issued by financial regulators and how to pre-empt the risks they pose

The Indian financial sector has seen a steady rise in the number and scope of regulations, as regulators work to safeguard a growing market and provide an enabling environment for markets participants.

India’s key financial regulators – the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI) and the Insurance Regulatory and Development Authority of India (IRDAI) – are statutory bodies that operate as quasi-judicial authorities with delegated legislative powers. It is a well settled position under Indian law that the delegation of legislative powers is valid only when the legislative policy and guidelines to implement it are adequately laid out. In addition, the delegate is only empowered to carry out the policy within the guidelines as laid down by the legislature. In other words, it can only fill in the details.

Regulations, rules, circulars and orders (and in certain cases guidelines) are forms of delegated legislation which have the force of law, so long as they do not go beyond the scope of the parent statute under which the delegate regulator is created or empowered.

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Ipsita Dutta is a partner at Cyril Amarchand Mangaldas in Mumbai and heads the firm’s financial regulatory practice.