Prime Minister Manmohan Singh on Thursday approved the formation of Financial Sector Legislative Reforms Commission (FSLRC) that will rewrite and clean up the financial sector laws in the country.
The government had, in Budget 2010-11, announced the setting up of FSLRC to review and simplify financial sector laws and bring these in tune with the current requirements. Finance Minister Pranab Mukherjee had also reiterated that the FSLRC would be set up. The need for the commission was strongly felt, as many old legislations became complex, lengthy and ambiguous after many amendments were made to these.
The mandate of the commission is to rewrite legislation focusing on broad principles and evolve a common set of principles for the governance of regulatory institutions in the financial sector. It will also examine a case for greater convergence of regulation and streamline the regulatory architecture of financial markets.
As part of financial sector reforms in India, an apex-level Financial Stability and Development Council (FSDC) was also set up in 2010 to strengthen and institutionalise the mechanism for maintaining financial stability. The council was mandated to undertake macro-prudential supervision of the economy and address issues related to inter-regulatory co-ordination. The finance minister had, in Budget 2010, proposed to set up FSDC. The government had, earlier proposed two sub-committees, one on regulatory coordination chaired by the Reserve Bank of India governor and the other, on financial stability, headed by the finance secretary.
However, after RBI raised concerns, the government changed the structure and said there would be only one sub-committee headed by the central bank governor. It also replaced the High Level Coordination Committee on Financial Markets.