The Srikrishna's code

    For any economy in the world, the financial sector serves as the backbone. Because, for an economy to grow and sustain the business activity of industries and other players has to be stable and growing. This becomes possible by providing positive environment and support to domestic entrepreneurs. The financial markets and banking system and other financial sector institutions supports the entrepreneurs by providing them long term funds, short term funds, loans and such other mechanisms for resource mobilizing. So, any crisis in the financial sector of an economy is a doom. This makes it essential to regulate this sector properly.

    In Indian economy, the financial sector regulation is carried out by few institutions like RBI, IRDA, PFRDA, SEBI etc. Recently a Financial Stability and Development Council has been setup to promote coordination among these regulatory institutions. Anyway, there is a need felt for reforms in financial sector legislation for the long term financial sector regulations which involves systemic risks. For this, government has appointed Financial Sector Legislative Reforms Commission chaired by Justice Srikrishna. The recommendations of this commission is released recently.

    This commission has proposed a new regulatory architecture. As per the recommendations, an Unified Financial Agency should be created by merging existing four agencies namely SEBI, FMC, IRDA, PFRDA. The commission also recommends to continue RBI with modified functions. Totally, the commission recommends for seven agencies with distinct functions.

1. FSAT (Financial Sector Appellate Tribunal) - to replace Securitied Appellate Tribunal
2. Resolution Corporation - to replace DICGC (Deposit Insurance and Credit Guarantee Corporation)
3. Financial Redressal Agency - new agency
4. Public Debt Management Agency - new agency
5. FSDC (Financial Stability and Development Council)
6. RBI
7. UFA (Unified Financial Agency) - new agency

While quoting the rational behind this huge changes in existing regulatory architecture, the commission said in coming 25 to 30 years India's GDP will be eight times the current GDP, so there is a need for drastic changes. Anyhow implementation of these recommendations may not be smooth as there exists some difference of opinion inside the commission itself.

Reference:

http://www.thehindu.com/business/Economy/srikrishna-panel-moots-indian-financial-code-bill/article4558956.ece