Consensus seems to be emerging amongst policymakers on taking forward the recommendations of the Financial Sector Legislative Reforms Commission (FSLRC).
A possible merger of market regulator Sebi with the Forward Markets Commission (FMC) is also being considered as a pre-cursor to the Unified Financial Authority that was a key suggestion by the panel.
Finance minister Arun Jaitley is understood to have held discussions with senior officials on the FSLRC report.
According to highly placed sources, the finance ministry is now working out a proposal on how to begin implementation of the suggestions.
“Some of the non-legislative proposals of the FSLRC report are already being implemented but the big issue was the legislative proposals including the draft Indian Financial Code. This too is now on the discussion board,” said the source.
The move comes soon after the Reserve Bank of India had lashed out at the report with RBI governor Raghuram Rajan calling it “somewhat schizophrenic”.
“That was the RBI view, which has been taken on record. But it is the finance ministry that has to look into law making,” stressed the source.
The FSLRC panel led by Justice BN Srikrishna was appointed by the UPA government to work out comprehensive reforms for financial sector regulations.
However, finance minister Arun Jaitley had affirmed the new government’s support to the reforms in the Union Budget last month. “There are some important recommendations of the Financial Sector Legislative Reforms Commission like the enactment of the Indian Financial Code which is considered necessary for better governance and accountability,” he had said.
In its report submitted in March 2013, the panel had suggested a unified regulator for the financial sector while the RBI could function as the monetary authority. It had also suggested an additional layer of oversight.
While the entire transition could take some time, the finance ministry has been calling for a merger of market regulator Sebi with the FMC, pointing out that this was even suggested by the FSLRC.
“This will be a relatively easier merger as the regulators are housed within the finance ministry,” said the source, adding that these can be done through amendments to the Sebi Act, 1992.
The proposal has gained much steam after the Rs 5,600 crore payment crisis in NSEL in August last year that led to the FMC being transferred to the finance ministry from the consumer affairs ministry.