FSLRC recommendations - Moneylife

FSLRC recommendations - Moneylife
In May 2013, in
response to an article in a financial newspaper, I had observed:
Not much
research is needed to conclude that finance ministry and FSLRC, in a hurry to
resolve certain minor issues, ignored the evolution of the role of RBI and the
care with which RBI has nurtured the financial sector. Fed Reserve and RBI
function in two different worlds. To say that time is not right for dismantling
or truncating the RBI which is doing creditably well as is being admitted in
several international forums, would be telling the obvious.
The dissenting notes recorded by
4 out of 7 members who signed the final report are well-argued documents, which
inter alia plead the case for maintaining the basic features of RBI and assert the
need for allowing the central bank to carry on with its present mandates. One
wonders what motivated the FSLRC Chairman to finalize the report ignoring the
difference of views expressed especially by K J Udeshi, P J Nayak and Y H
Malegam.  
It
would appear that the Commission did not get opportunity to understand the
present relationship between the RBI and GOI. The regulatory apparatus plus
legislations in financial sector in India are in working condition. The
FSLRC’s effort to re-invent them has pushed the present regulators and
supervisors to a confused state, making the possibility of an intelligent
debate on the issue remote.
The
idea of creating a Unified Financial Agency for all financial regulators except
RBI, truncating RBI by separating Public debt Management and keeping the agency
doing that work (presumably with the same work force) in RBI premises, later
UFA subsuming even RBI, all give a feeling that the FSLRC was not allowed to
‘apply its intelligent mind’ and in the eagerness to satisfy all, and so fast,
it has forgotten its own brief. Perhaps, the purpose would be served better, if
RBI is allowed to function with its present mandate, a coordination committee
sorts out issues among the remaining regulators. If GOI aim is to reduce the
number of regulators, after necessary groundwork, merger of the regulatory agencies
outside RBI one by one, as work stabilizes could be thought of. The twin goals
of one Unified Financial Agency and managing the man-power-related issues that
may arise with merger here could be better handled this way.”
The
terse indictment of FSLRC report coming from Dr Rajan gives one the
satisfaction that in India, it is not easy even for governments to ‘cut and
paste’ policy formulations to suit individual whims and get away, and wiser
counsel will prevail, though this may take time.
 M G Warrier, Mumbai

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