FSLRC Suggested Constitution of Unified Financial Sector Regulator; reduced role of RBI

Financial Sector Legislative Reforms Commission (FSLRC) headed by Justice BN Srikrishna in its final report submitted to the Union Government of India on 22 March 2013 recommended constitution of unified financial sector regulator by deriving powers from Indian Financial Code including Commodity Derivatives Market.

The 200 page long report in its key recommendations have directed the Government of India for unification of 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) under a single regulator. It also recommended that the Reserve Bank of India should stay as the monetary Authority Regulating Bank.

As per the report of the commission, the regulatory structure shall be governed by the Financial Regulatory Architecture Act that to create a uniform legal process for the financial regulators. Before changing the legislative structure the Ministry of Finance shall unify the regulatory structure.

• 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.
• Proposal also includes reviewing and revision of the laws financial sector laws after every ten years.
• Paying required attention to the debt management and setting up of a financial redressal agency and a financial stability and development council is also recommended by the commission
• Conversion of the Appellate Tribunal into Financial Appellate Tribunal for hearing the appeals of both unified regulators and RBI is also suggested in the report
• The committee in its suggestion has recommended doing away of the multiple agency structure for foreign capital inflows, at present the work is done by Department of Industry Policy and Promotion and clearance to the proposals of investments is done by the Foreign Investment Promotion Board

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. FSLRC was set up two years ago for reviewing and harmonizing the financial sector legislations, rules and regulations that have gone obsolete or outdated in about a century’s time since when it was written.