Financial sector laws, such as the ones on banking, insurance and pension, will have a sunset clause if the Financial Sector Legislative Reforms Commission (FSLRC) has its way.
The FSLRC, which released an approach paper on harmonising financial sector laws on Monday, is likely to propose a sunset clause of about 10 years in its final report to be given to the government in March 2013.
“From 1934 (when the Reserve Bank of India Act was passed) to 2012, you cannot have the same legislation in the country. Law itself can give a sunset clause. It could be 10 years and after that the law can be reviewed,” FSLRC Chairman Justice B N Srikrishna told reporters on Thursday.
According to D Swarup, an FSLRC member, most laws in the country are ancient and it is necessary to make these relevant to our times. He pointed out that some foreign jurisdictions have a sunset clause of about 10 years.
“It has not come out in the approach paper, but has been talked about in the Commission more than once. So if there is a sunset clause, the government is obliged to review that particular law after 10 years. It may come out in the final paper,” said Swarup.
The Commission, formed in March 2011 to rewrite and harmonise financial sector laws, has also proposed a unified regulator for all financial sector laws including markets, insurance, commodities and pension. It, however, proposed to keep banking out of this purview.
The proposed body would subsume the Securities & Exchange Board of India (Sebi), Forward Markets Commission (FMC), Insurance Regulatory and Development Authority and Pension Fund Regulatory Development Authority (PFRDA).
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According to Swarup, there could be turf wars among regulators. He said the Commission would consider how legitimate their concerns are before giving its final views. He added unification of the regulators should not be difficult as two of them, FMC and PFRDA, are non-statutory at present. “If there is a will to do it can be done in three months,” he said.
The Commission has also proposed giving statutory backing to the Financial Stability Development Council, headed by the finance minister.
The FSLRC has also stressed on independence of regulators. It noted the current laws allow the government to issue directions to regulators. The commission wants the government control on regulators removed.