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| First, whether the regulatory and supervisory functions need to be combined as is currently the position or whether they should be separated from other RBI functions. |
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| What is of overriding concern is not whether regulation / supervision should be combined or separated from other RBI functions but how regulation/supervision is conducted. |
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| Second is the issue of coverage of the RBI's supervisory role, which is currently focussed more strongly on banks, but only to some extent in the case of NBFCs, especially those accepting public deposits, and to some extent, DFIs. |
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| Third, the broader issue of choice between mega regulator and single regulatory authority deserves to be addressed. |
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| In any case, the regulatory gaps and regulatory overlaps in the existing system have been noticed and they are being resolved through informal as well as ad-hoc arrangements. |
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| The market participants are somewhat uncomfortable with the vagueness implied in informal arrangements. |
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| Fourth, there are multiple institutional structures in the financial system. This has to be revisited firmly in the context of the move towards universal banking. |
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| Convergence between banks and DFIs would be easier in future as the reserve requirements of banks are reduced. |
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| The management of transition, especially of individual DFIs, could face hurdles, especially due to existence of both the statutory corporations and company form of organisation in the DFIs. |
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| Fifth, the concept of public financial institutions (PFI) appears not only anachronistic but some of the PFIs are performing functions such as motor car financing. The continued relevance of such special categorisation needs to be considered. |
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| Sixth, while the regulatory focus should be on protection of retail public depositors, currently, acceptance of public deposits are governed by regulations of Department of Company Affairs, SEBI and Reserve Bank. |
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| In fact, the effectiveness of the monetary policy itself could be in jeopardy if these multiple systems of regulation, including fixation of interest rates, by several agencies persists. There is a group in RBI studying this issue. |
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| Seventh, the issue of dual regulation i.e. by RBI and State Governments concerned has been repeatedly emphasised both in the case of urban cooperative banks and rural cooperatives. |
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| Some proposals have already been made in regard to Urban Cooperative Banks which are yet to be resolved in the Government. |
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| Rural cooperatives are yet another important set of credit institutions languishing from ill-effects of dual regulation. |
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| Eighth, in regard to public sector banks, which form the most important segment of the banking system being owned by the government, the Reserve Bank's regulatory thrust is always circumscribed. |
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| The basic issues relating to the form of organisation i.e. corporate or company; the extent of ownership, the nature of control over management by the major shareholder, the system of corporate governance are still subject to considerable vagueness. |
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| In fact, this unresolved situation is perhaps the most significant stumbling block in considering further changes in technology, in financial markets and even in monetary policy. |
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| Ninth, it is inevitable that the Reserve Bank takes a clear-cut view, at least in regard to Scheduled Commercial Banks, about the entry norms, the exit norms and norms for restructuring, inclusive of amalgamation. |
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| Tenth, the issue of conflict between owner and regulator in as much as RBI holding a predominate share in SBI apart from NHB and NABARD need to be resolved sooner than later. |
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| RBI's position has already been made clear in various documents of RBI that as a regulator, it would not wish to continue as owner. |
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| Eleventh, in the light of government's statement on Exim Policy that economic zones are to be treated as outside of the country for regulatory purposes, a view needs to be taken by the RBI as to whether offshore banking units of banks as branches of each bank could be considered. Such a separate regulatory prescription is possible under the newly enacted FEMA. |
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| Twelfth, with rapid growth in technology, and complexities in risk analysis as well as assessment, the regulated are racing ahead with both innovations and skills. |
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| RBI as a regulator will have to specially equip itself to facilitate innovations and assess the prudential requirements as well as regulatory implications of market practices. |
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| Finally, it is also essential to develop and sustain a well thought out framework for use of ratings of credit rating agencies by the RBI for regulatory purposes. |
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