Reform,rewrite

The Financial Sector Legislative Reforms Commission,long promised and much delayed,was finally announced on Thursday. Headed by a former Supreme Court judge,B.N. Srikrishna,the panels 11 members include bankers,such as P.J. Nayak of Axis Bank; economists,such as M. Govinda Rao of the National Institute of Public Finance and Policy; and regulators,such as former pension funds overseer,Dhirendra Swarup. The finance minister promises a 24-month term for the commission,and its members will have to work hard indeed,for their assigned task might well be the largest and most complex handed to any reform commission in independent India. They are to completely rewrite Indias financial-sector laws and range beyond them,too.

The immediate provocation for thinking about such a committee might have been the financial crisis of 2008,and the renewed focus it brought to ensuring that regulatory lacunae dont permit the incubation of problems that could bring an entire system to a standstill. Indias regulatory apparatus has been built up piecemeal,and as the financial sector grows and deepens,oversight cannot continue to be haphazard. The commission will have to streamline regulatory architecture,and lay out a common set of principles for regulation. And that task is far from easy: it will require the review,and possible redrafting,of as many as 60 different acts of Parliament. For banking alone,there are different regulations that cover private,foreign and nationalised banks,which must be harmonised. And the regulatory and proprietorial interests of the government must be properly separated in the reformed framework.

As if that wasnt a tough enough task,the commission has also been asked to look at a couple of hot-button issues: should,for example,new laws contain a statement of principles of legislative intent,intended to aid the courts in interpreting them? Data privacy,too,has been included in the terms of reference. This will be a hard slog,and require input from an enormous number of stakeholders. Its fortunate,therefore,that the commission includes not just the regular policy wonks,but those with hands-on experience as well as some from the private sector. Parliament already has an ambitious legislative reform agenda,and if this commission reports on time,that agenda will only grow.