FSLRC

Financial Sector Legislative Reforms Commission Set up in March 2011 by Ministry of Finance To examine the existing age ol institutional frame!or" governing the financial sector in #n ia an suggest reforms $ea e by Former %ustice S M &rishna an has members from various isciplines li"e la!' finance' public a ministration' economics etc( Main intention)* #n spite of the rastically changing global scenario' over +0 acts' rules an regulations' some eca e ol la!s have been getting only a fe! mo ifications !ithout a substantial change in the basic foun ation of la!s( This Commission suggests an overhaul of all those la!s an provi es a structure to eal !ith all the financial pro ucts an services un er one hea ( Tas"s)* First tas" * To evelop strategy in , areas of financial la! -liste later. Secon tas" / To establish financial regulators an provi e for in epen ence as !ell as accountability of the regulators( All the suggestions in brief (main points for short answer) Securities an 0xchange 1oar of #n ia -S01#.' For!ar Mar"ets Commission -FMC.' #nsurance Regulatory an 2evelopment 3uthority -#R23. an 4ension Fun Regulatory an 2evelopment 3uthority -4FR23. shoul be merge into a 5nifie Financial 3gency -5F3.( Role of R1# shoul be restricte to regulating ban"s an managing monetary policy( Setting up of seven agencies for managing the financial sector - escribe in etail later. * R1#' 5F3' Financial Sector 3ppellate Tribunal -FS3T.' Financial Sector 2evelopment Council -FS2C.'Resolution Corporation' Financial Re ressal 3gency an 4ublic 2ebt Management 3gency FS2C shoul be given statutory frame!or"( Setting up of a ne! 2ebt Management 6ffice -2M6. an subsuming the existing 2eposit #nsurance an Cre it 7uarantee Corporation of #n ia -2#C7C. into the Resolution Corporation(

9 elements of Financial Law 1( Consumer 4rotection)* To brea" caveat emptor attitu e -!hich means the buyer alone is responsible for assessing the 8uality of purchase before buying. 0stablishing FR3 / consumers can complain here about all the financial firms / one stop agency The problems !ill not only be solve but also be use as fee bac" to improve regulation 2( Micro*pru ential regulation)* #f a financial firm ma"es a promise to a consumer' that promise has to be chec"e !hether it can be uphel or if it !oul lea to the failure of the firm( This regulation is principle base ( For example' principles re8uire proportionality -greater restrictions for greater ris".' e8ual treatment -e8ual treatment of e8ual ris".' an so on( 9( Resolution)* 3 :Resolution Corporation: !oul "eep a chec" on all financial firms !hich ma e promises an !hen a firm is reaching the stage of closure' #t !oul intervene even before it is completely ban"rupt -i(e( net!orth of the firm is near ;ero but not negative. an force shut o!n or sale of the firm thus protecting small consumers either by trasnferring them to more reliable firms or paying them( The main ifference bet!een micro*pru ential regulation an resolution is that micro*pru ential regulation is a continuous affair !hereas resolution comes into picture !hen a firm is about to fail( 1oth !oul have close co*or ination( The above three are the main pillars of the propose financial la!( <( Capital Control)* Ministry of Finance !oul ma"e =rules> that control inboun capital flo!s -an their repatriation. an R1# !oul ma"e =regulations> about outboun capital flo!s-an their repatriation.( The implementation of all capital controls !oul vest !ith the R1#( ?( Systematic Ris")* The essence of the systemic ris" perspective to loo" at the financial system as a !hole-not one firm or one sector etc( Can be consi ere as bigger version of micro*pru ential regulation. -Financial Stability an 2evelopment Council -FS2C..' !ill analyse the entire financial system an not a subset of it +( Financial inclusion an mar"et evelopment)* The ob@ectives are #nfrastructure evelopment of mar"et / to be one by regulators * li"e ta"ing initiatives etc Re istribution an financial inclusion / to be one by govt * li"e notifications in ga;ette etc A( Monetary 4olicy)* R1# has complete po!ers in eci ing this B(4ublic 2ebt Management 3gency)* 2ebt management re8uires an integrate picture of all onshore an offshore liabilities of the 7overnment( 3t present' this information is fragmente across R1# an the Ministry of Finance( 5nifying this information' an the relate ebt management functions' !ill yiel better ecisions(

The tas"s of cash management an an overall picture of the contingent liabilities of the 7overnment are integrate into this single agency ,( Contracts' tra ing an mar"et abuse)* 6b@ectives are to regulate infrastructure institutions !hich impact the financial mar"ets' regulate commercial la!s an ensure integrity of the information provi e by the financial mar"ets( -The information provi e by the securities etc has public goo s characteristic an falsification of that information is calle mar"et abuse. The seven agencies proposed b FSLRC 1( Reserve 1an" of #n ia R1# !ill perform three functions) monetary policy' regulation an supervision of ban"ing in enforcing the propose consumer protection la! an the micro*pru ential la!' an regulation an supervision of payment systems in enforcing these t!o la!s( 2( 5nifie Financial 3gency This !oul implement consumer protection la! an micro*pru ential la! for all financial firms other than ban"ing an payments( Thus all the financial tra ing !oul be organise un er one hea !hich !oul lea to consistency of regulation of all the firms( 3lso since the regulatory agency is the same in all sectors a level playing fiel !oul be provi e for all the sectors( Since it ta"es over the !or" from R1# on areas of 1on *Currency*2erivatives Cexus' an from FMC for commo ity futures' there !oul be clear mar"ing of functions bet!een the t!o agencies( This avoi s conflict thus helping achieving accountability( 9( Financial Sector 3ppellate Tribunal The present S3T !ill be subsume in FS3T' !hich !ill hear appeals against R1# for its regulatory functions' the 5F3' ecisions of the FR3 an some elements of the !or" of the Resolution Corporation( <( Resolution Corporation The present 2eposit #nsurance an Cre it 7aurentee Corporation of #n ia -2#C7C. !ill be subsume into the Resolution Corporation !hich !ill !or" across the financial system( ?( Financial Re ressal 3gency This ne! agency !ill setup a nation!i e machinery !here consumers can file complaints against all financial firms( +( 4ublic 2ebt Management 3gency 3n in epen ent ebt management office is propose (

A( Financial Stability an 2evelopment Council The existing FS2C !ill become a statutory agency' an have mo ifie functions in the fiel s of systemic ris" an evelopment(

References)* http)DDfinmin(nic(inDfslrcDfslrcEreportEvol1(p f http)DDarticles(economictimes(in iatimes(comD2019*0A*0?Dne!sD<09,220BE1Efslrc*financial*sector* appellate*tribunal*unifie *financial*agency 2etails)* Manasa Srinivasan 3ny