Revamping financial sector: Time for super regulator?

The Indian financial sector may change unrecognizably. A financial sector legislative reforms commission set up by the last budget has put out its first approach paper and there is enough in those 35 pages to give a jolt.

Following are the earth shattering changes proposed to the financial sector by the FSLRC headed by Justice Srikrishna.

> SEBI, IRDA, PFRDA to be rolled into one financial regulatory authority.

> RBI remains as the monetary authority and the banking regulator.

> A resolution corporation be set up that will swiftly takeover financial firms that are slipping into insolvency.

> A common Appellate Tribunal should be formed that will hear complaints from all regulators - banking, securities, insurance and pension.

>A financial redressal authority that will be like a parallel court structure available in every district for consumer complaints.

>An FSDC should be made that will concentrate on over all financial stability and an independent debt office that will manage government debt, now being done by RBI.

The commission's broad thrust is that instead of sector specific regulators and rules like for securities, insurance, pension, there should be common rules governing all financial institutions and instruments.

Hence, consumer protection rules, prudential rules like capital adequacy and provisioning, should be written in broad terms with regulators applying them to their specific sector

The commission was set up by budget 2011, to review, simplify and rewrite the financial sector laws, to evolve a common set of principles for governance of financial sector regulatory institutions and remove inconsistencies and uncertainties in legislations and regulations and streamline the regulatory architecture of financial markets.

The commission's approach paper also states that while it will ensure laws are rewritten to make regulators independent from the executives. Meanwhile, the new laws will also ensure strict accountability of the regulators by giving them measurable and non conflicting goals, for example, RBI to ensure inflation control.

For a government that has sat on much simpler review laws like the DTC and the Company's Act for over five years, a suggestion that over 50 laws be rewritten and passed seems a tall ask.