24-March-2011 17:27 IST

Resolution Nofifying Constitution of Financial Sector Legislative Reforms Commission (FSLRC) Issued

The Resolution notifying the constitution of Financial Sector Legislative Reforms Commission(FSLRC) was issued today by the Government of India. This is in pursuance to the announcement made by the Union Finance Minister Shri Pranab Mukherjee in his budget  speech of 2010-11 to rewrite and harmonise financial sector legislations, rules and regulations. This had become necessary as the institutional framework governingIndia’s financial sector was built over a century.

The composition of the Commission is as follows:

Shri Dhirendra SwarupMember Convenor

Joint Secretary, Capital Markets Nominee Member

Shri C K G Nair is Secretary to the Commission.     

The budget announcement was made with a view to rewriting and streamlining the financial sector Laws, Rules and Regulations to bring them in harmony with the requirements of India’s fast growing financial sector.

There are over 60 Acts and multiple Rules/Regulations in the sector and many of them date back decades when the financial landscape was very different from what is obtaining today. Large number of amendments made in in these Acts over time has increased the ambiguity and complexity of the system.

The Commission would simplify and rewrite financial sector legislations, including subordinate legislations, to achieve harmony and synergy among them.This will remove ambiguity, regulatory gaps and overlaps among the various legislationsmaking them more coherent and dynamic and help cater to the requirements of a large and fast growing economy in tune with the changing financial landscape in an inter-connected financial world. In the long-term, it would help usher in the next generation of reforms, contribute to efficient financial intermediation enhancing the growth potential of the nation.

The Terms of Reference of the Commission include the following:

(i) Examining the architecture of the legislative and regulatory system governing the Financial sector in India,

(ii) Examine if legislation should mandate statement of principles of legislative intent behind every piece of subordinate legislation in order to make the purposive intent of the legislation clear and   transparent to users of the law and to the Courts.

(ii) Examine if public feedback for draft subordinate legislation should be made mandatory, with exception for emergency measures.

(iv) Examine prescription of parameters for invocation of emergency powers where regulatory action may be taken on ex parte basis.  

(v) Examine the interplay of exchange controls under FEMA and FDI Policy with other regulatory   regimes within the financial sector.

(vi) Examine the most appropriate means of oversight over regulators and their autonomy   from government.

(vii) Examine the need for re-statement of the law and immediate repeal of any out-dated legislation on the basis of judicial decisions and policy shifts in the last two decades of the financial sector post-liberalisation.  

(viii) Examination of issues of data privacy and protection of consumer of financial services in   the Indian market.

(ix) Examination of legislation relating to the role of information technology in the delivery of financial services in India, and their effectiveness.

(x) Examination of all recommendations already made by various expert committees set up   by the government and by regulators and to implement measures that can be easily accepted.

(xi) Examine the role of state governments and legislatures in ensuring a smooth inter-state financial services infrastructure in India.

(xii) Examination of any other related issues.

The Commission’s headquarter would be in Delhi.  The Commission will submit its report to the Union Finance Minister within 24 months.

The first meeting of the Commission is scheduled to be held on 5^th April 2011.

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DSM/SA

Financial legislative reform established to rewrite and harmonise financial sector laws and review regulatory architecture and protections. Constitution of a Financial Sector Legislative Reforms Commission to restate and harmonise financial sector laws, remove ambiguity and overlaps, and align legislation with the contemporary financial landscape. The Commission is charged to review the legislative and regulatory architecture, examine principles for subordinate legislation and mandatory public consultation, set parameters for emergency regulatory powers, assess regulator oversight and autonomy, address data privacy and consumer protection, evaluate IT's role in service delivery, review prior expert recommendations, and consider the role of state governments in inter-state financial services infrastructure.