The government has assured the high level committee on financial markets (HLCC) that it will not finalise the roadmap for the proposed Financial Stability Development Council without consulting the regulators.
At a meeting of the committee, which consists of financial sector regulators and finance ministry officials, the government representatives said that the framework for the proposed council was still to be finalized. It is expected to take a month and after that the finance ministry, which is preparing the plan, will float a discussion paper.
The agenda for the proposed FSDC and Financial Sector Legislative Reforms Commission (FSLRC), to review and rewrite financial sector laws, were two keen issues on the HLCC agenda on Friday.
In his budget speech last month, Finance Minister Pranab Mukherjee had announced the establishment of the two bodies. Sources present at the HLCC meeting said the government wanted to brief the regulators about the two entities.
While FSDC will be an inter-regulatory body and is aimed at facilitating inter-regulatory coordination. A day before the HLCC meeting in the first-ever Financial Stability Report released by the Reserve Bank of India had said that the relationship between FSDC and HLCC, which is an informal body created through a communication from the finance ministry to RBI in 1992, needs to be addressed.
Besides, it had said that RBI was best placed to handle issues related to financial stability.
Sources said the FSLRC was aimed at reviewing the legislative framework in light of the developments over the past several years. “Apart from the Sebi Act, which was written in 1992, all the other financial sector laws have only undergone amendments and need to be rewritten to avoid any conflict with other legislations,” said a source.
The finance ministry is of the opinion that once the laws are rewritten, the overlap in regulatory jurisdiction, such as the one over unit-linked insurance plans, would be avoided.
