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A unified financial regulator is unlikely anytime soon. The Financial Stability and Development Council (FSDC) today said major recommendations of the Financial Sector Legislative Reforms Commission (FSLRC) would take time to be examined and taken forward.
FSDC, which met today under the chairmanship of Finance Minister P Chidambaram, said while some of the major legal and institutional reforms suggested by the commission would take time, action on other recommendations could be taken up separately, in consultation with various stakeholders.
In a report in March, FSLRC, headed by retired judge B N Srikrishna, had proposed a unified regulator for all financial sector laws related to markets, insurance, commodities and pension. It had, however, proposed keeping banking out of the unified regulator’s purview.
Besides reviewing the asset quality and additional capital requirements of banks, according to Basel-II norms, FSDC also discussed the recent initiatives by the government and the Reserve Bank of India (RBI) to monitor the banking system’s credit quality.
“It was felt despite the concerns about some deterioration in asset quality, largely due to global and domestic economic conditions, the strong capital adequacy of banks would enable the banking system to withstand the stress,” the finance ministry said in a statement.
The council also reviewed the progress in the development of a vibrant corporate bond market.
Saying a number of steps had been taken in this regard, it requested the departments/organisations concerned to expedite the remaining steps.
Recognising the role of financial inclusion and financial education in an inclusively growing economy, the finance minister said steps should be taken to encourage and facilitate qualitative improvement in the participation of new subscribers in financial markets.
FSDC was also apprised of an FSDC sub-committee’s progress in a number of areas, including key reforms proposed under the Financial Stability Board framework through various inter-agency/inter-departmental implementation groups, the signing of a memorandum of understanding by financial sector regulators for cooperation in supervision and the monitoring of financial conglomerates.
Today’s FSDC meeting was also attended by RBI Governor D Subbarao, Securities and Exchange Board of India Chairman U K Sinha, Insurance Regulatory and Development Authority Chairman T S Vijayan, Finance Secretary R S Gujral, Revenue Secretary Sumit Bose, Economic Affairs Secretary Arvind Mayaram, Financial Services Secretary Rajiv Takru and Chief Economic Advisor Raghuram Rajan, among others.
