Union Government to soon implement many reforms recommended by the Financial Sector Legislative Reforms Commission : Finance Minister Arun Jaitley

Finance minister Arun Jaitley said this past Saturday, at an event organized by the Institute of Company Secretaries of India in Mumbai, that the government is keenly studying the Financial Sector Legislative Reforms Commission (FSLRC) report and will implement several of its recommendations in the coming days.

(Arun Jaitley at an event organized by the ICSI in Mumbai on Saturday)

 The Financial Sector Legislative Reforms Commission (FSLRC) headed by Justice (retd.) B.N. Srikrishna was constituted by the Ministry of Finance, Government of India in March 2011 with a mandate to comprehensively review and redraw the legislations governing India’s financial system. According to the FSLRC, the current regulatory architecture is fragmented and is fraught with regulatory gaps, overlaps, inconsistencies and arbitrage. 

To address this, the FSLRC submitted its report to the Ministry of Finance on March 22, 2013, containing an exhaustive analysis of the current regulatory architecture and mooted a draft Indian Financial Code to replace the bulk of the existing financial laws.  The draft Code seeks to move away from the current sector-wise regulation to a system where the RBI regulates the banking and payments system and a Unified Financial Agency subsumes existing regulators like SEBI, IRDA, PFRDA and FMC, to regulate the rest of the financial markets. This was in tune with the Commission’s recommendation of pursuing a non-sectoral, principle-based, legislative architecture for the financial sector through restructuring and upgrade of existing regulatory agencies, and creating new agencies wherever needed for better governance and accountability.

In September this year, the National Democratic Alliance Government had formed task forces to work on the FSLRC recommendations. Jaitley said the four expert groups were currently examining the various aspects of the committee’s suggestions, as many changes to existing laws and regulations might be required. The task forces would lay down the road map for upgrade of existing agencies and establishment of new agencies — the Financial Sector Appellate Tribunal, Resolution Corporation, Public Debt Management Agency and Financial Data Management Centre.  He did not comment on the current status of the work done by these groups. However he said that “Under present circumstances some administrative and legislative changes may be required to the recommendations of the FSLRC report.,”

The FSLRC report has been a bone of contention between the Union Government and the Reserve Bank of India. In June, RBI Governor Raghuram Rajan had called certain recommendations of the report “somewhat schizophrenic” and “faddish and impressionistic rather than based on deep analysis”.

The stiff opposition by the Reserve Bank of India (RBI) over the financial sector reforms recommended by the Financial Sector Legislative Reforms Committee (FSLRC) had even prompted President Pranab Mukherjee to make an unusual intervention and take up the issue with Prime Minister Narendra Modi.  Reports indicate that following the President’s intervention, the Prime Minister’s Office had asked the Finance Ministry to explain the inordinate delay in implementing the recommendations of the committee. 

Report submitted by the Financial Sector Legislative Reforms Commission (FSLRC) headed by Justice (retd.) B.N. Srikrishna can be accessed here.

Finance minister Arun Jaitley said on Saturday that the government is keenly studying the Financial Sector Legislative Reforms Commission (FSLRC) report and will implement several of its recommendations in the coming days.

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