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High-level FSDC will not be a super regulator: Pranab

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Press Trust of India Kirnahar (WB)

Asserting that financial sector regulators like RBI and Sebi would continue to enjoy powers, Finance Minister Pranab Mukherjee has said that the proposed high-level financial council FSDC will deal only with inter-regulatory issues and not act like a super-regulator.

"Let me say clearly that FSDC (Financial Stability and Development Council) will not assume the role of super regulator. The existing regulators will enjoy the powers as vested by (respective) Acts," Mukherjee told PTI in an interview here.

Noting that an air has been created that FSDC would take the role of a super regulator, he said, "This is not so."

 

Among the regulators, the Reserve Bank of Indian (RBI) has been raising concerns of autonomy in the wake of a proposal to establish FSDC and joint committee to sort out the turf war between Sebi and Irda over regulation of Unit Linked Insurance Policy (Ulip) schemes.

The purpose of setting up the FSDC, Mukherjee explained, was to coordinate the work of various financial sector regulators including RBI, Sebi, Irda and PFRDA.

To address the concerns of autonomy raised by RBI, the Finance Ministry had recently decided to set up an FSDC sub-committee which would be headed by the RBI Governor.

The Finance Ministry proposes to shortly announce the framework of FSDC which will be headed by the Finance Minister.

Mukherjee further said that such a council was necessary to resolve conflict among different regulators. "Certain things are necessary for smooth running of the system," he added.

The basic objective is to provide stability for a healthy development of the financial sector, he said, adding the FSDC will have representatives from the concerned quarters.

Answering questions on implementation of the Goods and Services Tax, Mukherjee said it would not be possible to introduce it in the absence of political consensus.

"So long as a political consensus is not achieved, it is not possible to introduce the GST. So far, there is no political consensus.

"The Constitution will have be to amended by ratification of two-thirds of majority. The UPA cannot do it alone," the Minister said.

In order to simplify the indirect tax structure, the Centre has proposed introduction of GST which will subsume levies like excise, service tax and sales tax.

Commenting on the forthcoming meeting of the finance ministers and central bank governors of G-20 in South Korea, Mukherjee said, the conclave would discuss various current problems besides analysing the present global scenario.

The agenda of the ministerial meet, he said, also include exit policy, continuation of the stimulus packages and fiscal consolidation.

Mukherjee, along with senior officials of the finance ministry, is schedule to leave for South Korea next week to attend the G-20 meeting. The ministerial meeting will be followed by G-20 Summit in November which will also be held in South Korea.

On likely movement of interest rate and its impact on growth, Mukherjee said, the Reserve Bank of India (RBI) will review the situation next month.

RBI is slated to come out with the second quarterly review of the credit policy on November 2 amid concerns of decelerating growth and rising inflation.

While the industrial production for August slipped to 5.6 per cent from 10.6 a year ago, the inflation inched up to 8.62 per cent in September and food inflation to 16.37 per cent for week ended October 2.

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First Published: Oct 15 2010 | 8:40 PM IST

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