Financial Sector Legislative Reforms Commission

The Financial Sector Legislative Reforms Commission (FSLRC) is a body set up by the Government of India, Ministry of Finance, on 24 March 2011, to review and rewrite the legal-institutional architecture of the Indian financial sector. This Commission is chaired by a former Judge of the Supreme Court of India, Mr. B. N. Srikrishna and has an eclectic mix of expert members drawn from the fields of finance, economics, public administration, law etc.

The Terms of Reference of the Commission include the following:

1.   Examining the architecture of the legislative and regulatory system governing the Financial sector in India

2.   Examine if legislation should mandate statement of principles of legislative intent behind every piece of subordinate legislation in order to make the purposive intent of the legislation clear and transparent to users of the law and to the Courts.

3.   Examine if public feedback for draft subordinate legislation should be made mandatory, with exception for emergency measures.

4.   Examine prescription of parameters for invocation of emergency powers where regulatory action may be taken on ex parte basis.

5.   Examine the interplay of exchange controls under FEMA and FDI Policy with other regulatory regimes within the financial sector.

6.   Examine the most appropriate means of oversight over regulators and their autonomy from government.

7.   Examine the need for re-statement of the law and immediate repeal of any out-dated legislation on the basis of judicial decisions and policy shifts in the last two decades of the financial sector post-liberalisation.

8.   Examination of issues of data privacy and protection of consumer of financial services in the Indian market.

9.   Examination of legislation relating to the role of information technology in the delivery of financial services in India, and their effectiveness.

10.                      Examination of all recommendations already made by various expert committees set up by the government and by regulators and to implement measures that can be easily accepted.

11.                      Examine the role of state governments and legislatures in ensuring a smooth interstate financial services infrastructure in India.

12.                      Examination of any other related issues.

The model of the proposed regulatory architecture will comprise the following agencies:

1.   The central bank as the monetary authority, banking regulator and payment system regulator. Banking operations, monetary policy and payment system would continue to be regulated by the RBI.

2.   A unified regulator for the rest of the financial sector. The Unified Financial Agency (UFA) would subsume the functions of key agencies such as the Securities and Exchange Board of India, the Insurance Regulatory and Development Authority, the Pension Fund Regulatory and Development Authority and the Forward Markets Commission.

3.   A Deposit Insurance-cum-Resolution Agency.

4.   A Public Debt Management Agency.

5.   A Financial Redressal Agency.

6.   A Financial Sector Appellate Tribunal.

7.   A mechanism for coordination, systemic risk, financial development and other issues where the role of multiple agencies are involved (FSDC/similar to FSDC) . Financial Sector Development Council (FSDC) should be given statutory powers. The FSDC is headed by the Finance Minister, with heads of all financial sector regulators as its members.