Unified financial regulator plan on despite Raghuram Rajan's criticism

NEW DELHI: The finance ministry has set up four task forces to draw up the roadmap for creation of a unified financial sector regulator as recommended by the Justice BN Srikrishnaheaded Financial Sector Legislative Reforms Commission (FSLRC), brushing aside Reserve Bank of India governor Raghuram Rajan’s very public criticism of the proposals.

North Block has also formed similar task forces for the creation of a Public Debt Management Agency, a Resolution Corporation and a Financial Data Management Centre in line with the government’s intent to pursue aggressive financial sector reforms.

Rajan had termed the panel’s recommendations, particularly in relation to regulatory functions, as “schizophrenic” and argued that implementing them could turn the regulator into a “paper tiger”, days ahead of the government’s first budget that clearly committed to the FSLRC suggestions.

“As recommended by the FSLRC, the government has set up task forces to lay the roadmap for the upgradation of existing agencies and establishment of new agencies namely FSAT (Financial Sector Appellate Tribunal), RC, PDMA and FDMC,” a finance ministry statement said here on Tuesday. The Srikrishnaheaded FSLRC had proposed sweeping changes to financial sector regulation and a draft Indian Financial Code to replace multiple and archaic financial sectors laws.

Justice NKSodhi will chair the task force that will prepare the groundwork for creation of the FSAT in line with the proposed Indian Financial Code. Incidentally, this task force does not have any representative from the central bank though it will have an invitee from market regulator Securities & Exchange Board of India (Sebi).

The task force will review the present functioning of the Securities Appellate Tribunal, develop organisation design, work out a financial plan and draw up a transition blueprint for switching over to new framework.

Former Sebi chairman M Damodaran will head the task force for the creation of the Resolution Corporation. RBI ex-deputy governor Subir Gokarn will head the task force on the Financial Data Management Centre that will be a repository of all financial data and will reduce cost of compliance for all financial firms.

Former PFRDA chairman D Swarup will head the task force on Public Debt Management agency that will manage government borrowings.