CCI wants insurance M&As in its ambit

NEW DELHI: The competition regulator has rejected the finance ministry's proposal to keep the mergers and acquisitions of ailing insurance companies out of its ambit, arguing that unlike in the case of banks there is no threat of a run on these firms.

While panic among depositors of a bank can pose a threat to the lender, insurance firms do not run this risk, a senior official of the Competition Commission of India told ET.

"There are no immediate social ramifications of a failing insurance firm. There is no reason to seek exemption for this sector," said the official, who requested not to be named, adding that the CCI has opposed the move in a reply to the Department of Financial Services.

The department had written to the corporate affairs ministry, under which the CCI operates, to grant exemptions to ailing banks and insurance companies from approaching the CCI for approvals of mergers and acquisitions.

Since the Competition Act 2002 does not provide exemption to any sector from its purview, only the ministry can decide to keep some sectors out of its ambit, under Section 54 of the Act, in the interest of state security or public welfare.

"We do see a merit in keeping loss-making banks out of our ambit as failing banks can cause stress on depositors. This can result in quick withdrawals and it is best if only the approval of one authority is sought," the official added.

Several sectoral regulators, including the Telecom Regulator of India, the RBI and Sebi, have been demanding exclusion from consultations with the CCI as they fear a dilution of their mandate in the respective sectors. However, a group of ministers constituted under P Chidambaram to look into the turf war ruled in the CCI's favour last month, taking the view that no sector can be given a blanket exemption from the competition regulator's purview.

The competition amendment bill will make it mandatory for regulators to periodically consult the CCI and complement each other. "Globally, too, regulators seek inputs from the competition watchdog to gain view on the antitrust side of the case. It is not our mandate to interfere with the policy decisions of such authorities and so blanket exemptions are never given," a senior official in the corporate affairs ministry said.