Justice BN Srikrishna, who headed the committee on Telengana which submitted its report recently, has been handpicked by the government for another tough job. The eminent jurist will head the much-touted Financial Sector Legislative Reforms Commission (FSLRC), which will have the crucial mandate to look into the inconsistencies in the laws governing the sector and rewrite them if need be.
According to government sources, FSLRC will have a total of six members including the chairman, but none of them would be from a serving regulator. ?No regulator will be a member of the Commission, but it can decide to hear what they (regulators) have to say on the perceived conflict between the laws,? said an official. The Commission would comprise experts in law and regulation.
The official added that FSLRC would give its recommendations on the changes needed in financial sector laws, if any, in its report which will have to be submitted to the government in the next 18 months. The finance ministry will soon move a Cabinet note for setting up the commission.
The proposal to set up FSLRC was announced by finance minister Pranab Mukherjee in the last Union Budget. The move was prompted by the fact that regulatory conflicts were emanating due to archaic laws governing regulatory agencies.
The ministry recognised the need for such a panel also due to the fact that financial products had changed considerably from being plain vanilla savings instruments to hybrid ones over the years. Some of them have combined elements of insurance, mutual funds and commodities.
While the public spat between market regulator Sebi and insurance regulator IRDA over the regulation of Ulips led to the setting up of statutory panel on hybrid products regulation, the financial stability development council (FSDC) that comprise all the financial sector regulators, had its first meeting recently. Experts feel the commission will be useful since the key reason for disputes breaking out among regulators are the old laws which needed to be rewritten, instead of being dealt with through amendments. Deepak Gupta, executive director of PricewaterhouseCoopers said: ?The industry will definitely benefit from this commission as it will clearly spell out the role of each regulator. For example, it could resolve the present ambiguity over regulation of mergers and acquisitions. This can reduce the number of approvals needed and time taken for securing them, making the process seamless and industry-friendly.
Instances in the past like consumer courts passing orders on the high interest rates charged by banks on credit card payments created a lot of confusion as banks come under the purview of Reserve Bank of India which has not mentioned the limit of interest rates that can be charged by banks under its guidelines. Also, there is much uncertainty over the role of the Competition Commission of India, in regard to the mergers and acquisitions in sectors that come under another regulator ? for example banking, that comes under RBI. The question is, will CCI have powers to review M&As approved by a sectoral regulator? The commission will have to look at a number of complex financial laws before it can summit its recommendations about the revisions needed.