- A government appointed panel today suggested a super regulator, merging oversight functions of market, commodity, insurance and pension regulators, while leaving the banking business regulation under the Reserve Bank.
- The Unified Financial Agency (UFA), as suggested by the Financial Sector Legislative Reforms Commission (FSLRC), would subsume the functions of key agencies such as SEBI, IRDA, PFRDA and Forward Markets Commission (FMC).
- Banking operations, monetary policy and payment system would continue to be regulated by the RBI.
- The FSLRC, headed by Justice B N Srikrishna, in its final report also suggested doing away with multiple agency architecture for scanning foreign capital inflows.
- At present, FDI policy is framed by DIPP, while FDI proposals are cleared by FIPB after getting due clearances from various agencies like Enforcement Directorate, CBI and RBI.
- The report, which was submitted to Finance Minister P Chidambaram, also suggested setting up of a debt management office (DMO) for raising resources for government expenses. Presently government raises funds by issuing bonds through Reserve Bank.
- Panel also suggests Financial Stability and Development Council be made a statutory body with more powers.
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Additional Reading !!!
What is FSLRC ?
- The Finance Minister announced the formation of the Financial Sector Legislative Reforms Commission (FSLRC) during his Budget speech of 2011-2012 to rewrite and harmonize financial sector legislations, rules and regulations.
- This had become necessary as the institutional framework governing India's financial sector was built over a century.
- The Resolution notifying the FSLRC was issued by the Government on 24 March 2011.
- The FSLRC is required to submit its findings within a period of 24 months.
The FSLRC is chaired by former Judge of the Supreme Court of India Justice B.N. Srikrishna.
Apart from the Chairman, the FSLRC consists of 9 other members and a Secretary.
- There are over 60 Acts and multiple Rules/Regulations in the financial sector and many of them date back decades when the financial landscape was very different from what is obtaining today.
- Large number of amendments made in these Acts over time has increased the ambiguity and complexity of the system.
- The Commission has to comprehensively review them and rewrite them for a modern financial sector in tune with the aspirations of the resurgent Indian economy.
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What is the Financial Stability and Development Council (FSDC) ?
- to b setup with a view to strengthen and institutionalize the mechanism for maintaining financial Stability and Development.
- Without prejudice to the autonomy of regulators, this Council would engage in macro prudential supervision of the economy, including the functioning of large financial conglomerates and address inter-regulatory coordination issues.
- It will also focus on financial literacy and financial inclusion.
- The Council shall also look into issue relating to financial development from time to time.
- The Council would have one Sub-Committee which would be headed by Governor, RBI.
- The Secretariat of the said Council would be in the Department of Economic Affairs, Ministry of Finance.