The Financial Sector Legislative Reforms Commission (FSLRC) has proposed the removal of conflicts over the roles of agencies regulating capital inflows.
Currently, multiple agencies such as the Department of Industrial Policy and Promotion (DIPP), Foreign Investment Promotion Board (FIPB), Sebi and RBI regulate capital inflows.
The report is looking at streamlining the regulations governing foreign inflows by proposing to simplify and provide clarity on the role of various agencies handling the subject. The report will be made public in a couple of days.
?We are looking at a regulatory role governing capital controls where various agencies like FIPB, DIPP and others perform bits and pieces of enforcement, and the procedure is quite complicated,? a source familiar with the commission’s deliberations told FE.
At present, FDI policy is framed by the DIPP, while many FDI proposals are cleared by FIPB after getting due clearances from various agencies like the Enforcement Directorate, CBI and RBI.
Control over foreign capital inflows is necessary at times for financial stability although at the current juncture, given the record high current account deficit, the government is making all efforts to attract inflows ? both FDI and FII.
In the past, various industry sectors have faced coordination issues between FIPB and DIPP. Experts believe India needs to put in place a more conducive policy for attracting foreign flows.
?Simplification of regulation along with ensuring protection of Indian markets is crucial to make India an attractive destination. A single window clearance and flexible instruments to attract long-term funds in sectors such as infrastructure are needed,? Ashvin Parekh, capital market expert, Ernst & Young said.
