All consumer complaints about any financial product from bank deposits to exotic derivative products could be soon handled by a common Financial Redress Agency in India. A massive rewrite of all financial sector laws in the country has decided on an Indian Financial Code Bill which puts consumer interest at the centre of all financial sector regulations.
The Financial Sector Legislative Reforms Commission (FSLRC) has suggested redrawing the role of sectoral regulators from RBI to PFRDA suggesting a framework that reduces the extent to which lobbying by big financial firms in one sector can dilute the law about that sector.
It has also suggested a review of the current regulations on capital controls and a single investment vehicle in the form of the qualified foreign investors (QFIs) to address unequal treatment of foreign investors. The suggestions,part of the two-volume report by the high level committee chaired by Justice BN Srikrishna,would keep pace with the countrys economic growth and the test of time.
Over the years,as the economy and the financial system have grown in size and sophistication,an increasing gap has come about between the requirements of the country and the present legal and regulatory arrangements, said the report which was submitted to the finance minister last week but made public on Thursday. It has given a time-frame of two years for the new framework to be in place after the law is passed by Parliament. However of the eleven member commission four including PJ Nayak,KJ Udeshi,YH Malegam and Jayanth R Varma have given have given dissenting notes.
The Commission has proposed that other than RBI which would principally set the monetary policy for the economy there would be a Unified Financial Agency which would draw in Sebi,FMC,IRDA and the PFRDA. It says this would overturn the current structure where retail investors and depositors face substantial losses including mis-selling of financial products,ponzi schemes and so on while a clutch of agencies work at cross purposes.
The Code has drawn up a single judicial tribunal for the sector called Financial Sector Appellate Tribunal,a Resolution Corporation to wind up companies that get into distress,the Financial Redressal Agency,Public Debt Management Agency and the modified Financial Stability and Development Council.