Government of India Volume I: Analysis and Recommendations

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FINANCIAL REGULATORY ARCHITECTURE which enforces the proposed consumer protection provisions across the entire financial system and a second Prudential Regulation Agency, which enforces the micro-prudential provisions across the entire financial system. In either of these paths, RBI would focus on monetary policy. These changes in the financial regulatory architecture would be relatively conveniently achieved, given the strategy of emphasising separability between laws that define functions, and the agencies that would enforce the laws. Over the years, based on a practical assessment of what works and what does not work, the Government and Parliament can evolve the financial regulatory architecture so as to achieve the best possible enforcement of a stable set of laws. 136 FINANCIAL SECTOR LEGISLATIVE REFORMS COMMISSION
CHAPTER 15 Transition issues Once the government decides to move forward with the Indian Financial Code, transitioning from the existing setup to the framework proposed by the Commission will require planning and co-ordination. If not managed well, regulatory uncertainty could introduce considerable difficulties in the system. The Commission recommends that the Central Government should consider establishing a focused project team within the Ministry of Finance to facilitate the overall transition process. This team must be provided adequate staff and resources to enable effective discharge of its functions. The Commission suggests that the tasks of the project team would be to: 1. Create and implement an overall blueprint for the transition to the new legal framework; 2. Steer the draft Code through the entire legislative process; 3. Facilitate information flows and co-ordinate with relevant departments or agencies of the government, including existing regulators; 4. Determine the manner in which existing regulations will be phased out and the timing of the draft Code coming into effect; and 5. Identify the steps to be taken to ease the transition process for regulated entities, such as onetime exemptions from capital gains tax or stamp duty requirements. To ensure that the transition is achieved in a timely and organised manner, the project team must devote significant efforts towards laying the groundwork for the actual creation and operation of new or modified agencies. In this context, the Commission suggests: 1. Aligning ongoing work with project plan: The project team must examine pending bills or draft regulations relevant to the financial sector in order to assess whether they are aligned with the key ideas of the proposed framework, as accepted by the Government. In the event of any material deviation, the project team may recommend that the Government consider the withdrawal of any bill that has been placed before Parliament. 2. Introducing some elements into existing practice: The Commission is of the view that many of its recommendations, particularly in the field of regulatory governance, build upon or formalise existing regulatory practices and procedures. Therefore, to the extent possible, the Commission’s recommendations on regulatory governance can be implemented by the existing regulators with immediate effect. For example, many regulators already invite public comment on draft regulations. A requirement that all public comments received must be published can be enforced with immediate effect. Such steps will not only ease the transition process, but also allow the regulators more time to modify their internal processes. 3. Preparation for creation of new agencies: With FRA, PDMA FDMC and FSAT, there is a particularly important role for the development of information technology (IT) systems. The development of these systems can commence ahead of time. The second ingredient is the physical facilities to house the new group of agencies. This would also benefit from advance work. FINANCIAL SECTOR LEGISLATIVE REFORMS COMMISSION 137
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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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MICRO-PRUDENTIAL REGULATION the oth
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RESOLUTION payment systems. The cor
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RESOLUTION Commensurately, the corp
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Table of Recommendations 7.3 Intera
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Table of Recommendations 7.5 Powers
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Table of Recommendations 7.7 Fundin
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CHAPTER 8 Capital controls Capital
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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 and 150: PUBLIC DEBT MANAGEMENT Table of Rec
Page 151 and 152: CHAPTER 13 Foundations of contracts
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 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
Page 201 and 202: ANNEXES 19. Role of surveyors: (a)
Page 203 and 204: ANNEXES 6. The law must provide for
Page 205 and 206: ANNEXES 31. Resolution of insurance
Page 207 and 208: ANNEXES 3. As shocks can spread thr
Page 209 and 210: ANNEXES 19.8.2. Terms of Reference
Page 211 and 212: ANNEXES (d) The Board of the target
Page 213 and 214: ANNEXES 2. The PDMA should adopt a
Page 215 and 216: ANNEXES 3. On the issue of co-opera
Page 217 and 218: 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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