India, Oct. 3 -- Over the past few months, it is becoming increasingly difficult to understand the actions of two major regulators, the Reserve Bank of India (RBI) for the banking system, and SEBI (Securities and Exchange Board of India) for stock markets. Both have proved to be cautious, and risk averse. Yet, they have simultaneously made decisions to fuel speculations, and risky activities. They have been conservative, and shied away from making the expected moves despite the pressures to do so. Still, they have opted for the unexpected initiatives that could be postponed. It is as if the two regulators are caught up in a vortex of whys and maybes.

Let us begin with the RBI. It maintained the status quo on interest rates, although ther...