The Financial Sector Legislative Reforms Commission (FSLRC) has recommended revamping the legislative framework governing the financial sector by a non-sectoral, principle-based approach and restructuring existing regulatory agencies and creating new agencies wherever needed. The FSLRC has given a draft legislation namely Indian Financial Code as Volume-II of its report. The basic approach of the FSLRC is to provide clear mandate and powers and mechanism for accountability to financial agencies. The tasks/mandate are consumer protection, prudential regulation, resolution mechanism, capital controls, systematic risk, financial inclusion and market development, and monetary policy which need to be addressed in a non-sectoral manner. The FSLRC recommended a seven agency structure for the financial sector which are the Reserve Bank of India (RBI), Unified Financial Agency (UFA), Financial Sector Appellate Tribunal (FSAT), Resolution Corporation (RC), Financial Redressal Agency (FRA), Financial Stability and Development Council (FSDC) and Public Debt Management Agency (PDMA).

The FSLRC Report has been examined by the Government. Broadly, recommendations of the FSLRC can be divided into two parts, legislative aspects and non-legislative aspects. The non-legislative aspects of the recommendations are relating to governance enhancing measures on consumer protection and greater transparency in the functioning of financial sector regulators; and the same has been accepted and is being implemented by all regulators on a voluntary basis. The legislative recommendations relate to re-writing the laws using a principle based approach, restructuring existing regulatory agencies and creating new agencies. Implementation of these recommendations would require wider consultations with stakeholders.

This information was given by the Minister of State for Finance, Smt. Nirmala Sitharaman in written reply to a question in Lok Sabha today.

Principle-based financial legislation to reassign regulator mandates and enable non-sectoral oversight across core financial functions. A principle-based overhaul of financial sector law is proposed to reassign clear mandates, powers and accountability to regulators, treating key tasks-consumer protection, prudential regulation, resolution, capital controls, systemic risk, financial inclusion, market development and monetary policy-in a non-sectoral manner; implementation involves restructuring the regulatory architecture and enacting a consolidated statute, while governance and transparency reforms are being advanced on a non-legislative voluntary basis.