Prime Minister Narendra Modi wants speedy implementation of recommendations given by Financial Sector Legislative Reforms Commission (FSLRC) submitted on March 22, 2013.
This will expedite measures such as implementing new monetary policy framework agreement and merger of Forward Market Commission with Securities & Exchange Board of India (SEBI) among others.
Senior Government officials said that a communication has been sent from the Prime Minister’s Office (PMO) to the Economic Affairs Department of the Finance Ministry.
“The communication expressed concern about the delay of over 18 months and mentioned desire of the Prime Minister for quick action,” another official told
The Commission has recommended revamping the legislative framework governing the financial sector by a non-sectoral, principle-based approach, and restructuring existing regulatory agencies as well as creating new agencies wherever needed.
It has also suggested a draft legislation – Indian Financial Code.
The basic approach of the commission is to provide clear mandate, powers and mechanism for accountability to financial agencies.
The FSLRC has recommended seven agency structures for the financial sector – the Reserve Bank of India (RBI), Unified Financial Agency (UFA), Financial Sector Appellate Tribunal (FSAT), Resolution Corporation (RC), Financial Redressal Agency (FRA), Financial Stability and Development Council (FSDC) and Public Debt Management Agency (PDMA).
The tasks or mandate are consumer protection, prudential regulation, resolution mechanism, capital controls, systematic risk, financial inclusion and market development, and monetary policy which need to be addressed in a non-sectoral manner.
Two partsThe recommendations of the commission can be divided into two parts – legislative and non-legislative aspects.
On its part the Finance Ministry is finalising one of the non-legislative measures – new Monetary Policy Framework Agreement with the RBI. The proposed framework is based on recommendations given by the Commission and the Urjit Patel Committee, with some inputs from Raghuram Rajan Committee on Financial Sector Reforms.
It aims to change the formulation of monetary policy and will also focus on inflation targeting.
A Finance Ministry official said the effort is to sign the new agreement by February 1, 2015. However, the RBI will take a call on the date of implementation.