FEBRUARY 9: India needs to have a fresh look at its financial sector regulatory system, said Planning Commission deputy chairman KC Pant.Speaking at a CII function here on Wednesday, he said, "At a time when the world is heading towards creation of an international financial architecture, India will have to seriously consider financial sector integration."There is need to pay adequate attention to financial regulation and supervision. In our zeal to develop the financial sector rapidly during the nineties adequate attention was not paid to regulations in the financial sector, Pant said.Integration of the financial sector is necessary to attract private sector into infrastructure development for better growth. Ability of the private sector to make investments in infrastructure are severely restricted as it requires long-term commitment of funds while the present system primarily provides only short- and medium-term loans.The plan panel chief pointed out that the Ninth Five Year Plan has identified the fragmented nature of Indian market as one of the most important constraints to attaining high-levels of investment and growth.The fragmentation actually arises from the legal system which views different segments of the financial sector as being distinct and stand-alone rather than as components of an integrated system designed for smooth transformation of savings into investment.Pant said that the problem is to decide whether to climb the learning curve or wait for achieving the level and sophistication of regulatory knowledge necessary for integration of the financial sector. Rapid spread of information technology and the advent of Internet-base financial services are creating conditions under which global financial integration is only a matter of time. Under the circumstances, domestic financial regulations alone may not suffice thought they continue to be important.
