Hindu : 10 Apr - Editorial : Fencing in the RBI

The new legislative which has formed to control the financial sector of India seems to have received serious criticism and concern based on the the present situation India is under going. Financial Sector Legislative Reforms Commission's (FSLRC) final report suggested some points which had mixed reviews from the inside member itself. One of the main reform was to dissolve Securities and Exchange board of India,  Insurance Regulatory and Development Authority and Pension Fund Regulatory and Development Authority to form a single entity which would be named as United Financial Regulatory Authority (UFRA). It means that if this reform is implemented then there would be only two governing bodies monitoring financial sector in India, RBI and UFRI. Economists believe that this would not only increase the burden on single entity UFRA but also would not be feasible on the present financial infrastructure of India. What concerns them most is the suggestion that UFRI would be headed by a board but not the regular top to down approach. Making it worse is shift of controlling interest rates from RBI to UFRI. This would not only take off most important powers of RBI which has been running as purely on power of its own, under no influence of ruling government, but also puts such a power to a body which would obviously be ruled by the board selected by ruling government. Such claims are reasonable since it was clearly mentioned that Financial Minister of the government would be heading UFRI if its formed. Though the report says that RBI would have Veto powers to pass any resolution passed by UFRI. Economists believe it would restrict such powers only on paper

Article thus believes that such reforms would take some time to be implement considering the current economics of India and also that the report needs strong revisions and amendments if the commission wants people to trust them that such a report has been produce to improve financial situation of India but not act as a magic trick to present such vital powers to the leaders running the government. Article ends with a sarcastic comment that the downfall of our financial situation is because of over financialisation of markets but not with the failure of regulations.

                                                                                                   - Vamshi Regalla