P Chidambaram asks market regulators to take preventive steps to cushion impact of US tapering

NEW DELHI: The government firmed up plans for the next round of financial sector reforms in consultation with regulators and drafted an ambitious strategy to tap large global debt funds to shore up foreign exchange reserves.

Finance minister P Chidambaram also asked financial sector regulators to put in place all possible measures to avoid any adverse impact on India from the US scaling back its stimulus programme, which he expects "sooner or later".

"The opportunity available due to the postponement of the reversal of the monetary policies in advanced economies should be utilised to further address the macroeconomic imbalances," he said at the meeting of the Financial Stability and Development Council (FSDC) held under his chairmanship on Thursday.

There was consensus among council members that the impact of the tapering would not be significant, a finance ministry official said. The government and the regulators will also formulate a joint strategy to tap sovereign wealth funds to attract long-term foreign debt capital into the country.

Sovereign wealth funds from the Middle East and the Nordic countries besides pension funds of Australian state governments will be targeted as part of this exercise. "We want to reach out to potential debt players," the official said.

FSDC, the apex regulatory coordination body, also decided to pick up elements from the FSLRC (Financial Sector Legislative Reforms Commission) report that can be implemented without legislation.

"There was near unanimity about implementing the non-legislative recommendations of the FSLRC," the official said.

A finance ministry statement later said FSDC had decided that all financial sector regulators, including the Forwards Markets Commission, will finalise an action plan for implementation of FSLRC principles relating to regulatory governance, transparency and improved operational efficiency that don't require legislative action.

The Justice BN Srikrishna-headed FSLRC has proposed a new framework for financial sector regulation and proposed a draft Indian Financial Code to replace multiple and archaic financial sectors laws.

FSDC, which includes the Reserve Bank of India, Securities & Exchange Board of India, and Insurance Regulatory & Development Authority, will analyse public comments and feedback to further fine tune the draft Indian Financial Code.

The council also decided that action should be taken to finalise the roadmap for creation of new institutions such as the Resolution Corporation, Public Debt Management Agency, Financial Sector Appellate Tribunal, and Financial Data Management Agency.

FSDC also discussed the corporate distress redressal mechanism under the Companies Act, 2013 and identified the role of regulators and the government in implementing the provisions to prevent and take remedial measures on the issue.