Justice BN Srikrishna, who headed the Financial Sector Legislative Reforms Commission (FSLRC), has said that the time is opportune to carry out financial sector reforms in India over the next five years, instead of waiting for a crisis.
Srikrishna, who headed a group constituted by the finance ministry to review the draft Indian Financial Code (IFC) which has proposed vast changes in the country’s financial architecture, including a new Independent Debt Management Office to handle sovereign debt functions, a Monetary Policy Committee and a single unified regulator for the financial sector covering the capital and commodities markets besides insurance and pensions, said that he didn’t see no reason why financial sector reforms could not be pursued.
After the release of the original report of the FSLRC in 2013 and the recent draft IFC, there has been a view that given the changes in the global markets after the 2008 crisis and which led to a review of some of the established models of regulation and governance, India should tread cautiously.
But according to Srikrishna, this was the right time to bring about changes in the financial sector.
“Over the next five years, we should do it and it is the right time. There is nothing wrong now. When will we do it otherwise, when there is a crisis?” he told The Indian Express on Wednesday. Once a Commission completes its assignment, it is up to the government to accept or reject the recommendations, he said, citing the case of the last Pay Commission which he headed.
“It is up to the government to bring about changes in one shot or do it in driblets depending on its capacity. “
Srikrishna said that after the Commission’s recommendations, the views of regulators were sought by the government.
The Reserve Bank of India had reservations relating to a few proposals as did some of the other regulators. But over the last few days, much of the debate has centered around a change in the composition of the Monetary Policy Committee marked by a removal of the veto power to the RBI Governor on setting interest rates.
The original recommendation in the FSLRC report proposed a veto for the RBI Governor while the latest changes in the draft IFC Code also favours the government nominating four members in the proposed seven member Monetary Policy Committee.
“We (FSLRC) had suggested a working solution then with a veto power. Our idea was that the majority should not be from the RBI and there should be a good number of outside experts. The government modified some of it. But the debate is not dead yet,” Srikrishna said
His job this time around, almost two years after the FSLRC submitted its report, was to put in legal language what the government wanted, Srikrishna said.
Finance minister Arun Jaitley had requested Srikrishna to vet the code.