 "After FSLRC, FM too worried on multiplicity of regulators")
"This creates inefficiencies in addressing critical emerging issues in an increasing dynamic, complex and interconnected financial world," he said at a seminar on the Indian Financial Code, suggested by FSLRC.
In March, FSLRC submitted its report to the Finance Ministry, recommending creating a unified regulator for the financial sector by merging SEBI, IRDA, PFRDA and Forward Markets Commission with it. For the time being, it suggested to keep the Reserve Bank of India out of the proposed Unified Unified Financial Agency (UFA). But after sufficient experience is gained it wanted even RBI to be merged with UFA.
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Though refraining from directly specifying the issue of unified regulator, the finance minister said the the existing framework also contains overlap of laws and agencies because of which conflicts occur.
"In recent times we had turf battles between regulators," he said.
Earlier, SEBI and IRDA had fought a turf war as to who would control unit-linked insurance products and the Finance Ministry had to intervene to sort out the issue.
On the suggestion of FSLRC to enact Indian Financial Code as an omnibus legislation to regulate financial sector, the minister said: "I am not sure how much this law will go through in the same fashion when it finally goes to Parliament ... (but it) will be a major milestone in Indian financial sector reforms."
He said the Indian financial sector is governed by around sixty Acts and related rules & regulations. Many of these date back to around 80 years
Chidambaram said unlike in the past, the implementation of the FSLRC recommendations would require positive inputs from stakeholders.
"Alongside, very careful analysis of every sentence of the existing laws and every section of proposed code will need to be taken up before we agree upon large scale repeals of legislation. The requirements on this new arrangement will be understood and attempts made to adopt necessary changes," he said.
Chidambaram said many of the elements of the FSLRC recommended legal processes are not unacceptable to the present laws. "
Therefore, I suggest the Ministry of Finance and the regulatory agencies may look seriously at operationalising some of these elements at the earliest even within the scope of the present laws," he said.
Amid outcry over Ponzi schemes causing huge losses to common people, Chidambaram said there are regulatory gaps and efforts are being made to frame a new law to oversee financial sector.
"The present arrangements have a number of gap areas, where no regulators are unambiguously in-charge, such as issue of regulatory oversight over diverse Ponzi schemes that we have discovered recently. These are cleverly designed to be out of the purview of regulatory agencies," he said.
The department of financial services has proposed amending the prize Chits and Money Circulation Schemes (Banning) Act, 1978 to make inducement to persons for joining multi-level marketing, pyramid, ponzi or collective investment schemes an offence to plug loopholes in money churning activities of companies.
The department is heading another inter-ministerial committee to suggest changes in various acts to avoid overlap to nab offenders in scams like Saradha which has left scores of investors high and dry.
The first meeting of this committee is scheduled to be held tomorrow.
Chidambram also said passing legislation in India is not easy, it has become even more complex with coalitions and legitimisation of obstruction as a Parliamentary tactic. "Nevertheless, we cannot give up," he said. .
The finance minister said the government is duty bound to people of this country to put in place a financial regulatory system that will serve us well for next 50 or more years.
He cited the example of the Companies Bill, which has been passed in the Lok Sabha, but still awaits passage in the Rajya Sabha.