BackFinance ministry makes move to implement some FSLRC recommendations
Finance ministry will track implementation of steps and help regulators in implementing proposals
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New Delhi: The finance ministry has released a handbook proposing steps for regulators to develop a financial regulatory framework that would harmonize processes and standards across sectors.
The move is a step towards implementing some of the non-legislative recommendations of the financial sector legislative reforms commission, or FSLRC, headed by retired Supreme Court judge B.N. Srikrishna.
The handbook suggests various steps to ensure consumer protection, more transparent regulation framing by regulators, effective reporting to gauge the performance of the regulators and standardisation of processes such as scrutiny of applications and issuance of notices.
The finance ministry will track the implementation of these steps and assist regulators in implementing these proposals.
The FSLRC report, submitted in March, suggested far-reaching changes for the financial sector, including a single law that would subsume most of the existing regulations.
Though finance minister P. Chidambaram had assured that the government would implement the FSLRC’s recommendations, many of these require legislative changes, which are time-consuming, and could face opposition from many of the financial sector regulators.
Because of this, the government moved to implement some of the non-legislative recommendations of the report before the end of its tenure next year.
The financial stability and development council—which has representation from regulators including the Reserve Bank of India, Securities and Exchange Board of India, Insurance Regulatory and Development Authority, and Pension Fund Regulatory and Development Authority—in its meeting in October approved a series of steps for each regulator to implement the recommendations of FSLRC.
The handbook seeks to bring in sync the provisions of the draft Indian Financial Code with the existing regulations.
To ensure consumers are protected, the finance ministry has recommended that all regulators frame regulations to ensure that personal information disclosed by a consumer is protected, full disclosures by financial service providers including any possible conflict of interest, steps to prohibit unfair conduct and steps for redressal of consumer grievances.
It also suggested creating a separate category of retail investors to ensure better protection and said any term that is detrimental to a consumer should not be part of a financial contract.
In the handbook, the government proposed that regulators seek the opinion of the public on all regulations before they are finalized. It also suggests that each regulator do a cost-benefit analysis before finalizing a recommendation, and that the board of each regulator should pass the final regulation.
Every term in a regulation should be defined in the same way as it is defined in these sections.
The handbook says regulators have agreed to move to a reporting system wherein their performance will be reviewed by the government based on some indicators.
The government has suggested streamlining the approval granting process by the regulators, and proposed that regulators clarify the criterion on which an applicant will be judged and specify the reasons for refusal of a particular application along with a chance for the applicant to make his case.
For investigations into entities or individuals, the government has recommended that the investigating officer be separate from the authority that has decided to initiate the investigation or will decide on the penalty.
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