A government appointed Commission today suggested that financial sector regulators such as Sebi as well as Irda be merged into a Unified Financial Agency (UFA) and the role of RBI be restricted to regulating banks and managing monetary policy.
The two-volume report of the Finance Sector Legislative Reforms Commission (FSLRC), which is marked by four dissent notes, has also suggested that SBI and LIC be brought under the purview of the Companies Act.
Headed by former Justice B N Srikrisha, the 10-member FSLRC has said that the Reserve Bank should govern only outward capital flows and be stripped of its power to control Non-Banking Finance Companies (NBFCs). The task of monitoring inward flow be left to the government.
These proposals did not find favour with four members of the Commission who wanted RBI to be the sole regulator of foreign capital flows and also of the NBFCs.
Under the proposed regulatory architecture, Securities and Exchange Board of India (Sebi), Forward Markets Commission (FMC), Insurance Regulatory and Development Authority (Irda) and Pension Fund Regulatory and Development Authority (PFRDA) would be merged into a UFA.
The Commission proposed setting up of seven agencies -- RBI, UFA, Financial Sector Appellate Tribunal (FSAT), FSDC, Resolution Corporation, Financial Redressal Agency and Public Debt Management Agency --- for managing the financial sector.
In order to give effect to its recommendations, the Commission has come out with a draft Indian Financial Code Bill, containing 450 clauses and six schedules.
"The Commission is mindful that over the coming 25 to 30 years, Indian GDP is likely to become eight times larger than the present level, and is likely to be bigger than the United States GDP as of today... The aspiration of the Commission is to draft a body of law that will stand the test of time", the report said.
