Financial Sector Legislative Reforms Commission (FSLRC)

The Financial Sector Legislative Reforms Commission (FSLRC) was set up by Govt to review and rewrite the legal-institutional architecture of Indian financial sector. The commission was chaired by Justice B. N. Srikrishna.

Two kinds of recommendations – legislative and non legislative

1)    Non- legislative - The non-legislative aspects of the recommendations are relating to governance enhancing measures on consumer protection and greater transparency in the functioning of financial sector regulators; and the same has been accepted and is being implemented by all regulators on a voluntary basis

 2) Legislative - The legislative recommendations relate to re-writing the laws using a principle based approach, restructuring existing regulatory agencies and creating new agencies

·         The commission has proposed a sector-neutral Indian Financial Code to replace multiple and old financial sector laws, splitting the regulation between the Reserve Bank of India and a new ‘Unified Financial Agency’ that will oversee the remaining financial sector.  the Securities and Exchange Board of India ( Sebi),Forward Markets Commission (FMC), Insurance Regulatory and Development Authority ( IRDA) and Pension Fund Regulatory and Development Authority (PFRDA) should be merged into this new agency

 seven pillars of the new Law are:

1)       Reserve Bank of India (RBI) : Regulator of Banking & Payments monetary policy.

2)       Unified Financial Agency (UFA) : Regulator of financial firms and activities other than banking and payments.

3)       Resolution Corporation (RC) : Deals with closure of distress in firms.

4)       Financial Redressal Agency (FRA) : Single window complaint mechanism against financial institutions and intermediaries.

5)       Financial Stability & Development Council (FSDC) : Recast as statutory body. Will mange systematic risks and development.

6)       Public Debt Management Agency (PDMA) : Government’s debt manager.

7)       Financial Sector Appellate Tribunal (FSAT) : Will hear complaints against all financial regulators.

·         It also recommends empowering the existing Financial Stability and Development Council, by making it a statutory body responsible for managing risk and crises in the financial system.

·         recommends setting up of a financial data cell, which will look out for systemic risk in the financial sector, especially the ones arising out of the financial conglomerates.