Government of India Volume I: Analysis and Recommendations

CHAPTER 1
Introduction
1.1. FSLRC and its Mandate
The Ministry of Finance, Government of India, constituted the Commission 1 vide Resolution
dated the 24 th March, 2011, ‘with a view to rewriting and cleaning up the financial
sector laws to bring them in tune with the current requirements’. The Resolution, detailing
the imposition and Terms of Reference (TOR) of the Commission, is in Annex 19.1.
The TOR are quite broad and cover a gamut of issues related to the financial sector in
India. Broadly, the Commission has been tasked with examining and reviewing the legislative
and regulatory systems; the inter-play of jurisdictions of various regulators; the
issues relating to conflict of interest of regulators; the manner of drafting and implementation
of subordinate legislation; the criteria and terms of appointment of senior officials
in the regulatory authorities and appellate systems of financial sector; clarifying the principles
of legislative intent; the issues relating to independence and autonomy of regulators;
re-statement and/or repeal of legislations on the basis of liberalisation and other
developments in the last two decades; the issues on data privacy and protection of consumers
of financial services; the role of information technology and effectiveness of delivery
of financial services; the recommendations made by expert committees in the past;
the issues relating to inter-state aspect of financial services infrastructure and any other
related issues; and evaluating the raison d’etre of the several laws governing the financial
sector, some of them as old as 140 years. Keeping them in context and fitting them to the
broad framework of the economy’s future requirements has been a daunting task. The
Commission was given a time-frame of twenty four months to complete this effort.
The Commission was set up at a time when the global economy was recovering from
the 2008 financial crisis. At the time, lessons from what went wrong and the possible options
were being debated. These ideas and inputs were freshly available to the Commission.
India escaped the crisis fairly unscathed; and therefore, the Commission did not
have to work on regulatory structures and laws in a fire-fighting mode, which is not an
appropriate way of building sustainable institutional structures. The Commission could,
therefore, assimilate the lessons from the crisis, and at the same time, think and construct
a model relevant to the Indian context in a calm and detached manner supported
by quality research, extensive deliberations and detailed interaction with a host of experts
and stake-holders.
1 The terms Commission and the Commission are used interchangeably in this report
FINANCIAL SECTOR LEGISLATIVE REFORMS COMMISSION 1