Government of India Volume I: Analysis and Recommendations

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PUBLIC DEBT MANAGEMENT Table of Recommendations 12.6 Scope of the public debt management agency There are limitations on the public debt management agency’s functions, particularly in expanding it to States, as the management of State debt is a State subject under the Constitution of India. Accordingly, the draft Code must provide for the following: 1. While the public debt management agency acts as a Central Government agency obliged to manage only Central Government debt, it must undertake those functions related to State Government debt, which have implications for the Central Government’s debt portfolio. 2. This involves maintaining a comprehensive database of State Government debt and co-ordinating the Central Government’s borrowing calendar with the market borrowings of State Governments. 3. However, the public debt management agency may provide the option to the States of managing their public debt, subject to the State Governments entering into agreements with the agency to this effect. 4. Additionally, the public debt management agency should be empowered to offer technical assistance to State Governments to set up their own debt management offices. fused with financial regulation. The functions of consumer protection and micro-prudential regulation, for the Government securities market, do not rest with the public debt management agency. However, as a specialised body that understands the market for Government securities, the public debt management agency should be an important voice on legal and institutional reforms that are necessary to achieve its objectives. Going beyond this, public debt management agency must run a continuous effort of measuring market efficiency and liquidity, and asking how these can be improved, so as to cater to the goal of achieving low-cost financing for the Central Government in the long run. It must undertake initiatives to continually broaden access and participation in the market for bonds issued by the Indian Government, in terms of both investors and financial intermediaries, since this would yield improved market efficiency and liquidity. 12.4. Scope Imposing the services of the public debt management agency on State Governments is not possible since the management of State debt is a State subject under the Constitution. The public debt management agency must be a Central Government agency obligated to manage only Central Government debt. It must, however, undertake functions related to State Government debt, which have implications for the Central Government’s debt portfolio. This involves maintaining a comprehensive database of State Government debt and co-ordinating the Central Government’s borrowing calendar with State Governments’ market borrowings. However, at a later stage, the public debt management agency may provide the option to the States of managing their public debt (see Table 12.6), subject to the State Governments entering into agreements with the agency to this effect. This will not oblige State Governments to deal with the public debt management agency, as State Governments will also be able to enter into similar agreements with any entity offering such services for managing their public debt. Additionally, the Commission recommends that the public debt management agency should be empowered to offer technical assistance to State Governments to set up their own debt management offices. 118 FINANCIAL SECTOR LEGISLATIVE REFORMS COMMISSION
CHAPTER 13 Foundations of contracts and property 13.1. The interaction of financial laws with other laws Financial laws do not operate in a vacuum. They interact with other laws in numerous ways. The Commission recognises that managing the interactions of the financial sector laws and regulations with other areas of law is of great significance. In this chapter the Commission addresses the following issues of interaction of financial laws and their operation in the financial markets: 1. Interaction with other laws: For the operation of financial markets and services, certain modification of the applicability of general laws of contracts, property and corporations are required. Some examples of these are the good faith principle in insurance, legal certainty of derivatives, requirement of corporations to make disclosures for publicly traded securities. Public policy concerns, and the regulatory stance, need to be unified for a broad array of traded securities in contrast with the present sectoral laws. 2. Infrastructure Institutions: Financial markets and services operate on a special set of institutions like exchanges, clearing houses, depositories, trade repositories, etc. Regulations governing these institutions, and the actions of these institutions, are integral to achieving objectives of consumer protection, micro-prudential regulation, systemic risk, and competition policy. In addition, a unique feature of some Infrastructure Institutions lies in the production of information that has a public goods character. This calls for transparency-enhancing measures and blocking market abuse. 3. Special provisions for Infrastructure Institutions: Financial market institutions also require certain levels of protection from the operation of normal legal principles of areas of laws like evidence, property, bankruptcy, etc. These are mainly related to the certainty of the transactions carried out by financial parties on these institutions. For example, settlements carried out in a clearing house cannot be undone when a participant goes bankrupt. 4. Public issue and trade of securities: Issuing of securities to the larger public requires financial laws to govern entities outside the financial sector with respect to the securities they have issued. The objective of these regulations is not to regulate non-financial firms but to ensure that obligations incorporated in the securities created by them are fairly applied and the financial markets have adequate information about these non-financial entities which have issued the securities to make informed decisions about investments in such securities. 5. Issues pertaining to the market abuse: Financial markets operate based on the information generated by the issuers of securities and the integrity of transactions and information of Infrastructure Institutions. This requires the law to criminalise actions which undermine the integrity and fairness of trading of securities. FINANCIAL SECTOR LEGISLATIVE REFORMS COMMISSION 119
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Government of India _______________
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Contents Acronyms . . . . . . . . .
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CONTENTS 12 Public debt management
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ACRONYMS FSAT Financial Sector Appe
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Acknowledgement When the Ministry o
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ACKNOWLEDGEMENT appreciate the effo
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EXECUTIVE SUMMARY rience till date.
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EXECUTIVE SUMMARY out many processe
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EXECUTIVE SUMMARY can issue regulat
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EXECUTIVE SUMMARY Alongside this, i
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EXECUTIVE SUMMARY to analyse one co
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Contracts, trading and market abuse
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5. A new Financial Redressal Agency
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EXECUTIVE SUMMARY States GDP as of
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1.2. Deliberations in the Commissio
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INTRODUCTION amendments frequently
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INTRODUCTION sectoral composition o
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INTRODUCTION The Commission has und
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CHAPTER 2 The tasks of financial la
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THE TASKS OF FINANCIAL LAW This is
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THE TASKS OF FINANCIAL LAW ◮ “i
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THE TASKS OF FINANCIAL LAW 2.5. Own
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THE TASKS OF FINANCIAL LAW desirabl
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CHAPTER 3 Structure of the regulato
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STRUCTURE OF THE REGULATOR Table of
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CHAPTER 4 Functions and powers of t
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FUNCTIONS AND POWERS OF THE REGULAT
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CONSUMER PROTECTION The consumer pr
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Table of Recommendations 5.4 Princi
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CONSUMER PROTECTION using or disclo
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CONSUMER PROTECTION providers. The
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CONSUMER PROTECTION Table of Recomm
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CHAPTER 6 Micro-prudential regulati
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MICRO-PRUDENTIAL REGULATION let tha
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MICRO-PRUDENTIAL REGULATION Table o
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MICRO-PRUDENTIAL REGULATION PRINCIP
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Page 102 and 103: RESOLUTION payment systems. The cor
Page 104 and 105: RESOLUTION Commensurately, the corp
Page 106 and 107: Table of Recommendations 7.3 Intera
Page 108 and 109: Table of Recommendations 7.5 Powers
Page 110 and 111: Table of Recommendations 7.7 Fundin
Page 113 and 114: CHAPTER 8 Capital controls Capital
Page 115 and 116: CAPITAL CONTROLS 2. Absence of judi
Page 117 and 118: CAPITAL CONTROLS Table of Recommend
Page 119: CAPITAL CONTROLS Table of Recommend
Page 122 and 123: Table of Recommendations 9.1 Object
Page 124 and 125: Table of Recommendations 9.3 Establ
Page 126 and 127: SYSTEMIC RISK filings by financial
Page 128 and 129: SYSTEMIC RISK Table of Recommendati
Page 130 and 131: egulatory agencies. In such a situa
Page 132 and 133: FINANCIAL INCLUSION AND MARKET DEVE
Page 134 and 135: FINANCIAL INCLUSION AND MARKET DEVE
Page 136 and 137: Table of Recommendations 11.1 Objec
Page 138 and 139: Table of Recommendations 11.2 The m
Page 140 and 141: Table of Recommendations 11.3 Board
Page 143 and 144: CHAPTER 12 Public debt management 1
Page 145 and 146: PUBLIC DEBT MANAGEMENT of the publi
Page 147 and 148: PUBLIC DEBT MANAGEMENT State Govern
Page 149: PUBLIC DEBT MANAGEMENT Table of Rec
Page 153 and 154: FOUNDATIONS OF CONTRACTS AND PROPER
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Page 164 and 165: 14.2. Problems of the present arran
Page 166 and 167: FINANCIAL REGULATORY ARCHITECTURE T
Page 168 and 169: FINANCIAL REGULATORY ARCHITECTURE w
Page 170 and 171: TRANSITION ISSUES On the functional
Page 172 and 173: TRANSITION ISSUES service providers
Page 174 and 175: SUMMARY OF RECOMMENDATIONS NOT EMBE
Page 177: CHAPTER 17 Conclusion Financial eco
Page 180 and 181: 18.2. Note of dissent by K.J. Udesh
Page 182 and 183: 18.3. Note of dissent by P.J. Nayak
Page 184 and 185: NOTES OF DISSENT A second difficult
Page 186 and 187: NOTES OF DISSENT 6. The present arr
Page 189 and 190: CHAPTER 19 Annexes 19.1. Formation
Page 191 and 192: ANNEXES 19.2. List of consultants,
Page 193 and 194: ANNEXES * Did not participate in th
Page 195 and 196: ANNEXES 19.5. Interactions with aut
Page 197 and 198: ANNEXES (c) Examine whether informa
Page 199 and 200: ANNEXES 2. General development of m
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ANNEXES 19. Role of surveyors: (a)
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ANNEXES 6. The law must provide for
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ANNEXES 31. Resolution of insurance
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ANNEXES 3. As shocks can spread thr
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ANNEXES 19.8.2. Terms of Reference
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ANNEXES (d) The Board of the target
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ANNEXES 2. The PDMA should adopt a
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ANNEXES 3. On the issue of co-opera
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ANNEXES 14. Regulators must look at
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ANNEXES 31. The WG recommends the m
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ANNEXES (b) Efficiency of DRT: Suit
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ANNEXES (c) Pledged shares and exem
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ANNEXES 19.11. Interactions by the
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ANNEXES 19.13. Submissions to FSLRC
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Government of India Volume I: Analysis and Recommendations

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