Government of India Volume I: Analysis and Recommendations

FINANCIAL REGULATORY ARCHITECTURE
This proposal features seven agencies and is hence not a ‘unified financial regulator’
proposal. It features a modest set of changes, which renders it implementable:
1. The RBI will continue to exist, although with modified functions;
2. The existing SEBI, FMC, IRDA, and PFRDA will be merged into a new UFA;
3. The existing SAT will be subsumed into the FSAT;
4. The existing DICGC will be subsumed into the Resolution Corporation;
5. A new FRA will be created;
6. A new PDMA will be created; and
7. The existing FSDC will become a full-fledged statutory agency, with modified functions.
14.4.1. Draft Indian Financial Code
The Commission has drafted a consolidated Indian Financial Code, which embeds the
creation of the seven agencies and their responsibilities and functions. The draft Code
consists of the following fifteen Parts:
1. Preliminary and definitions
2. Establishment of financial regulatory agencies
3. Regulatory governance
4. Financial consumer protection
5. Prudential regulation
6. Contracts, trading and market abuse
7. Resolution of financial service providers
8. Financial Stability and Development Council
9. Development
10. Reserve Bank of India
11. Capital controls
12. Public Debt Management Agency
13. Investigations, enforcement actions and offences
14. Functions, powers and duties of the Tribunal
15. Miscellaneous
The part on establishment of financial regulatory agencies provides for the creation
of five new statutory bodies - UFA, Resolution Corporation, FRA, PDMA and FSAT. This part
also provides for the allocation of regulatory responsibilities between the two financial
sector regulators - UFA and RBI.
In case of RBI, the Commission recommends the continuance of the existing arrangement,
with RBI as the country’s monetary authority. The draft Code however revisits the
functions and powers of RBI, and sets out the manner in which it must be operated and
governed. This includes provisions for the creation of an MPC and the powers of the committee
in connection with the discharge of RBI’s monetary policy functions. Similarly, in
case of FSDC, the existing FSDC is to be recast as a statutory body.
The remaining provisions of the draft Code lay down the powers and functions of
these statutory bodies and the principles and processes to govern the exercise of their
powers.
In the process of achieving the financial regulatory architecture proposed by the
Commission, several amendments and repeals are also required to be made to the current
financial sector laws that create the existing regulators and lay down their powers
and functions.
14.4.2. Functions of the proposed agencies
We now review the functions of each of these seven proposed agencies:
134 FINANCIAL SECTOR LEGISLATIVE REFORMS COMMISSION