The ministry of finance has announced the creation of task forces for preparatory work related to the establishment of four of the agencies recommended by the Financial Sector Legislative Reforms Commission (FSLRC). Four separate task forces will establish a Public Debt Management Agency (for debt management on behalf of the government), a Resolution Corporation (for resolving the distress of financial firms in an efficient manner), a Financial Data Management Centre (for managing all financial regulatory data), and a Financial Sector Appellate Tribunal (a unified appellate tribunal for the financial sector). This move marks the most concrete step so far towards the implementation of the FSLRC recommendations and the enactment of the Indian Financial Code, a comprehensive bill aimed at replacing a majority of financial-sector laws with a principle-based framework for regulation.
All too often, the process that the finance ministry has begun commences after the enactment of a law by Parliament. As a result, there is a significant time lag between Parliament’s enactment of the law and the operation of the institutions created by it. This delay harms both citizens and parliamentarians, as the effect of a law is felt only after a substantial amount of time has passed. The terms of reference specifically require the task forces to develop a transition plan in this regard. The finance ministry’s move will, therefore, ensure minimum lag between the enactment of the Indian Financial Code and its implementation.
Another important consideration is the issue of the design of public institutions. The efficacy and efficiency of public administration rests on the quality of the internal processes and systems of the public agency. The terms of reference of the task forces require them to consider and incorporate global best practices pertaining to organisation design, human resource and IT systems. Additionally, they require the task forces to develop an appropriate business model for these agencies to ensure their operational independence and institutional durability. There is also a specific directive to the task forces to incorporate transparency and accountability mechanisms within the functioning of the agencies. Building such capabilities for these agencies prior to the enactment of the Indian Financial Code will go a long way in ensuring its success.