Financial Sector Legislative Reforms Committee (FSLRC) moots 2-regulator structure

The Financial Sector Legislative Reforms Committee (FSLRC), set up two years ago to rewrite and review financial sector laws that have become outdated or obsolete, submitted its final report to the finance ministry on Friday.

Among its key recommendations, the committee headed by former justice B N Srikrishna (pictured) has called for unifying the Securities and Exchange Board of India (Sebi), Pension Fund Regulatory and Development Authority (PFRDA), Insurance Regulatory and Development Authority (Irda) and  Forward Markets Commission (FMC) into a single regulator, Dhirendra Swarup, member - convenor, FSLRC, told DNA Money.

However, the Reserve Bank of India (RBI) should remain the monetary authority regulating banks, it has said in the 200-page report.

The report, to be made public in 2-3 days, is largely in line with the approach paper put out by FSLRC in October last year, said Swarup. “There is not much change in the report from the approach paper put out by the reforms committee.

The approach paper did not have in-depth explanations about some areas regarding capital controls and so on. On the basis of the feedbacks received on the paper, we have prepared the final round of report.”

The proposed regulatory structure will be governed by the Financial Regulatory Architecture Act that will ensure a uniform legal process for the financial regulators. The finance ministry will unify the regulatory structure before tweaking the legislative structure.

“Considering the relevance of the report, the government may take at least two years to implement the proposed reforms and probably they will get it done in a phased manner,” said Swarup.

The report has also suggested a sunset clause of 10 years for the financial sector laws. In other words, the laws would be reviewed in every 10 years.
The committee also recommended giving required attention to debt management and setting up of a financial redressal agency and a financial stability and development council.

The present Securities and Appellate Tribunal will be converted into Financial Appellate Tribunal, which will hear appeals against both RBI and the unified regulator, the committee has suggested.

The report has also mooted doing away with multiple agency structure for foreign capital inflows. Currently the foreign capital policies have been framed by the Department of Industry Policy and Promotion and the clearance is done by the Foreign Investment Promotion Board.

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