New Delhi, Nov. 4 -- India has no shortage of financial regulators, regulations or coordinating institutions. What appears questionable is whether anyone assesses their cumulative consequences for the financial system. Markets are interconnected, but their regulation often appears compartmentalized. Individually defensible interventions can, therefore, produce collectively suboptimal outcomes.

The problem is institutional fragmentation, overlapping jurisdictions, regulatory gaps and inadequate systemic diagnosis.

Consider the Additional Tier-1 (AT-1) bond episode. The Securities and Exchange Board of India's (Sebi) 2021 decision to treat perpetual AT-1 bonds as having a deemed maturity of 100 years for mutual fund valuation reflected le...