Government of India Volume I: Analysis and Recommendations

ANNEXES
31. Resolution of insurance firms issuing annuities should be considered along the
lines of resolution of any life insurance firm. This issue has been discussed in detail
in this report’s chapter on insurance firms.
32. Just as in the PFRDA Bill, NPS should be acknowledged as a unique object in the
law, and its various components should be regulated at par with their respective
categories.
33. The law should acknowledge the unique status of NPS as a government intervention
to address market failures in the retirement financing market, and the market
power is commands to meet its objectives. If NPS exerts anti-competitive pressures
over and above its basic objectives, it should be regulated from a competition
standpoint. NPS should be separated from the retirement financing regulator,
because there is conflict of interest in managing such a system and regulating the
retirement financing sector. This can be achieved by making the NPS Trust an independent
entity. The retirement financing regulator should regulate and supervise
the NPS Trust.
34. The law should give the regulator the powers to regulate infrastructure for retirement
financing sector. Sections from PFRDA Bill on regulation of infrastructure for
retirement financing can be considered for drafting these provisions in legislation.
These sections provide for regulation and supervision of infrastructure services
such as record keeping.
19.6.5. Recommendations on small savings
Legal framework
1. There is a need to consolidate and modernise the laws on small savings. Accordingly,
the GSB Act, GSC Act and PPF Act should be replaced with a consolidated
law that should, inter alia, contain provisions relating to manner of collection and
investment of funds, consumer protection, grievance redressal and, to the extent
relevant, prudential regulation.
Structure and regulatory framework
2. All functions related to the operation and management of small savings should
be performed by an independent entity that should be brought within the limited
purview of the financial regulator. However, prudential regulation of the proposed
small savings entity should not extend to changing the manner in which the funds
held by National Small Savings Fund (NSSF) are invested since that constitutes a
fiscal decision.
3. To address concerns that corporatisation of the scheme would lead to loss of public
confidence, it should be ensured that upon the transfer of the management of small
savings to an independent entity, the law effecting such transfer should explicitly
clarify that these schemes are guaranteed by the government.
Consumer protection
4. Requisite changes may be made in the laws governing small savings to include provisions
on investor protection, compensation and grievance redressal.
5. To minimise operational risks on account of agent defaults and to protect the interests
of investors, the law should lay down the framework for the licensing, qualifications
and training of agents.
19.6.6. List of Acts to be reviewed
1. Insurance Act, 1938
2. Insurance Regulatory Development Authority Act, 1999
FINANCIAL SECTOR LEGISLATIVE REFORMS COMMISSION 173