RBI wants Mistry report moves in phases

The Reserve Bank of India (RBI) is in favour of a cautious and gradual approach to financial sector reforms rather than a big-bang approach, as advocated by the Percy Mistry Committee report on making Mumbai an international financial centre.

In its detailed chapter-wise response on the Mistry report, submitted to the finance ministry, the central bank has expressed reservations over setting a deadline for undertaking financial sector reforms as suggested by the Committee.

The feedback from the RBI is "positive and cautious", a finance ministry official said.

"The RBI is broadly in agreement with the report. However, it has said that financial sector reforms cannot be pre-decided in a mechanical manner and wants step wise implementation," the official added.

The official said the finance ministry would soon take a final view on implementing the report. The ministry, which has sought comments from stakeholders, expects to receive all feedback on the recommendations by this month-end.

Apart from the RBI' comments, it has also received preliminary comments from the Insurance Regulatory and Development Authority (IRDA).

As a part of the consensus building process, the ministry had sought comments on the Mistry report from various ministries like Ministry of Commerce, Ministry of Urban Development and financial-sector institutions like Securities and Exchange Board of India (SEBI), IRDA as well as the RBI.

"We are yet to receive comments from the SEBI. Many ministries are also yet to respond," the official added.

The 15-member High Powered Expert Committee (HPEC) on making Mumbai an International Financial Centre was set up following an announcement in the Budget 2005-06.

The panel submitted its report to the finance ministry in April this year, though the chairman of the committee, Percy Mistry, resigned before the report's completion.

The committee has recommended full capital account convertibility by 2008-end, abolition of securities transaction tax, stamp duties, pruning of public debt and no restriction on foreign investment in sovereign bonds.

It also recommended imposition of goods and service tax on financial services and creation of a currency spot market and rupee-settled exchange traded currency derivatives market.

KEY RECOMMENDATIONS OF MISTRY COMMITTEE REPORT

Full capital account convertibility by 2008-end

Eliminate securities transaction tax by 2007 and stamp duties by 2008

Open up purchase of rupee-denominated debt instruments issued by the government to all buyers

Focus monetary authority exclusively on single task of managing key short-term 'base rate' by 2009-10

Set up independent public debt management office by 2009

Shift financial regulatory regime from rules-based regulation to principles-based regulation by 2011

Permit unrestricted entry of well-known global accounting firms operating in IFCs/GFCs by 2008

Transfer all regulation/supervision of any type of organised financial trading to SEBI by 2008