From Business World of 28 March 2005.
Senseless red
tape
Now that G N Bajpai is gone, doubts are
being expressed about his legacy, the market participants’ identification
number (MAPIN). M Damodaran, his successor at the head of SEBI, had pushed the
deadline for getting a MAPIN from March 31 to the end of 2005. Meanwhile, he
has appointed a committee to have another look at the MAPIN project. He has
naturally not asked it whether MAPINs should be introduced at all; that would
have been too pointed a slight to his predecessor. But he has certainly set the
stage for a substantial watering-down of the scheme.
Although he does
not want to raise hackles and hence would not ask the question, it still needs
to be asked: why is MAPIN necessary? Mr Bajpai’s answer might have been that he
wanted only genuine, respectable, law-abiding citizens and institutions to have
access to stock market transactions. Ever since 9/11, there has been much of
this kind of authentication. Banks have been asking their customers for all
kinds of documents – copies of passports, elector identification cards, ration
cards, chemical analysis of nose-drip and so on. Stockbrokers have been asking
their customers for their income tax identification numbers. Till then, India
was only a major producer of identities; no government agency considered itself
adult unless it had asked its victims to identify themselves. Then it became a
consumer of identities; for all kinds of minor transactions one had to furnish
one or another proof of identity. SEBI
joined the tribe rather late.
All this
labeling of humans might have been of some use if the label could be connected
with, or could evoke, complementary information. In a bank, for instance, the
bank account number, if correctly typed into a computer, brings forth
information on transactions in that account. Here the identifying number serves
an administrative purpose, or saves time and prevents error; if a person’s name
were his only identifier, typing in Rajesh Sharma may bring forth 3000 accounts
– or none at all.
But one label
should be enough. If everyone were given a unique number, name or combination
of both, that code should identify him for every conceivable authority. Only
Indians would think of the chaotic way various government authorities have gone
about giving everyone multiple and independent identification tokens. Wherever
other countries have thought of identifying their citizens, they have created a
single identification system. Thus in the US, a person’s social security number
identifies her – and nothing else does. Every institution asks for this number
to identify a person – and none creates its own numbering system.
The NDA
government was keen on creating a single identification scheme; but its
obsession was narrow. It wanted to identify residents of India who were not citizens.
So it was looking to give identity cards to people along borders. This kind of
incomplete identification is self-defeating. It would have led to perpetual
squabbles about whether certain Muslims were denied an identity card because
they were foreigners or simply because they were Muslims.
To date, the
Election Commission has gone furthest towards issuing identity cards to
electors. It would be most economical, and least cumbersome, to use the
Election Commission’s database for identifying everyone. It covers only adults,
whereas a proper record should cover everyone who is born – or at any rate
anyone who survives her first five years. Maintenance of the Election
Commission’s database should be taken over by the Registrar General, and made
part of the census. A running record of all humans in the country would also
make the taking of the decennial census easy – and could be used for many other
purposes, including focused sample surveys.
If there were
such a record of all living persons, would a MAPIN be necessary? The census
record would include everybody including cheats, shysters and crooks. But
however much SEBI may wish it, it is wrong to weed out people before they
cheat. The only correct way to bar a person from stock exchanges, if there is
any at all, would be after he is convicted of a crime that would justify such a
ban.
There is still a
case for ensuring that financial intermediaries are financially strong, and
that they know their customers. But SEBI long ago set up systems to ensure
this. All intermediaries have to register with it and pay through the nose for
the privilege; by now, even the impecunious BSE brokers have paid up. They all
have to give annual returns. All security holders have to register with a
depository; and when they buy or sell they have to register with a broker, with
corresponding red tape. That is enough, Mr Damodaran; do not make investors’
lives more complicated!
