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Financial Sector Legislative Reforms Commission (FSLRC)

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Financial Sector Legislative Reforms Commission (FSLRC) was set up by the Indian Government in pursuance of the announcement made in Union Budget 2010-11, to help rewriting and harmonizing the financial sector legislation, rules and regulations so as to address the contemporaneous requirements of the sector. The resolution notifying the FSLRC was issued on March 24, 2011. FSLRC had a two year term.

The Commission was chaired by Supreme Court Justice (Retired) B. N. Srikrishna, and had ten members with expertise in the fields of finance, economics, law and other relevant fields. The secretariat was placed at National Institute of Public Finance and Policy (NIPFP). Secretariat consisted of a Secretary at the level of Joint Secretary to the Government of India and other officials and support staff.


The establishment of the FSLRC is the result of a realisation that the institutional foundation (laws and organizations) of the financial sector in India needs to be looked afresh to assess its soundness for addressing the emerging requirements in a rapidly changing world. Today, India has over 60 Acts and multiple Rules/ Regulations that govern the financial sector. Many of them have been written several decades back. For example, the RBI Act and the Insurance Act are of 1934 and 1938 vintage respectively and the Securities Contract Regulation Act, which governs securities transactions, was legislated in 1956 when derivatives and statutory regulators were unknown in the financial system. A Large number of amendments were, therefore, made in these Acts and regulations at different points of time to address various needs. But these have also resulted in their fragmentation, often adding to the ambiguity and complexity of regulations in the financial sector.

The piecemeal amendments have resulted in unintended outcomes including regulatory gaps, overlaps, inconsistencies and regulatory arbitrage. The fragmented regulatory architecture has also led to loss of scale and scope that could be available from a seamless financial market with all its attendant benefits of minimising the intermediation cost. For instance, complex financial intermediation by financial conglomerates of today falls under purview of multiple regulators. Various Expert Committees have also pointed out these discrepancies and recommended the need for revisiting the financial sector legislations to rectify them.

It was therefore proposed to set up the Financial Sector Legislative Reforms Commission (FSLRC), which would, inter-alia, evolve a common set of principles for governance of financial sector regulatory institutions. The Commission would examine financial sector legislations, including subordinate legislations. The Commission would also examine the case for greater convergence of regulations and streamline regulatory architecture of financial markets.

Terms of Reference of the Commission

1)  Examining the architecture of the legislative and regulatory system governing the Financial sector in India, including:
a)  Review of existing legislation including the RBI Act, the SEBI Act, the IRDA Act, the PFRDA Act, FCRA, SCRA, FEMA etc., which govern the financial sector’
b)  Review of administration of such legislation, including internal structures and external structures (departments and ministries of governing), if required;
c)  Review of inter-play of jurisdictions occupied by various regulators;
d)  Review of jurisdiction of departments within each regulator, and consider need for segregation / combination, and such other streamlining;
e)  Review of issues relating to conflict of interest of regulators in the market;
f)  Review of the manner in which subordinate legislation is drafted and implemented;
g)  Review of eligibility criteria for senior officers in regulatory authorities and issues relating to tenure, continuity, and means of tapping and retaining lessons learnt by each authority;
h)  Examine a combined appellate oversight over all issues concerning users of financial legislation.
2)  Examine if legislation should mandate statement of principles of legislative intent behind every piece of subordinate legislation in order to make the purposive intent of the legislation clear and transparent to users of the law and to the Courts.
3)  Examine if public feedback for draft subordinate legislation should be made mandatory, with exception for emergency measures.
4)  Examine prescription of parameters for invocation of emergency powers where regulatory action may be taken on ex parte basis.
5)  Examine the interplay of exchange controls under FEMA and FDI Policy with other regulatory regimes within the financial sector.
6)  Examine the most appropriate means of oversight over regulators and their autonomy from government.
7)  Examine the need for re-statement of the law and immediate repeal of any out-dated legislation on the basis of judicial decisions and policy shifts in the last two decades of the financial sector post-liberalisation.
8)  Examination of issues of data privacy and protection of consumer of financial services in the Indian market.
9)  Examination of legislation relating to the role of information technology in the delivery of financial services in India, and their effectiveness.
10)  Examination of all recommendations already made by various expert committees set up by the government and by regulators and to implement measures that can be easily accepted.
11)  Examine the role of state governments and legislatures in ensuring a smooth inter-state financial services infrastructure in India.
12)  Examination of any other related issues.

FSLRC Chairman / Members

1)  Justice B.N Srikrishna: Chairman
2)  Smt. K.J. Udeshi: Member (Chairman, Banking Codes & Standards Board of India)
3)  Dr. PJ Nayak: Member (Chairman, Morgan Stanley India Company Pvt. Ltd.)
4)  Shri C. Achuthan: Member (passed away in September 2011; No member has been substituted for Mr. C. Achuthan)
5)  Shri Yezdi H. Malegam: Member (S.B.Billimoria & Company)
6)  Justice Debi Prosad Pal: Member
7)  Prof. Jayanth R. Varma: Member (Professor (Finance and Accounting), Indian Institute of Management, Ahmedabad)
8)  Dr. M. Govinda Rao: Member (Director, NIPFP)
9)  Shri Dhirendra Swarup : Member Convener
10)  Joint Secretary (Capital Markets), Department of Economic Affairs, Ministry of Finance: Nominee Member
11)  Shri CKG Nair: Secretary


The Commission had held wide-ranging consultations with stakeholders. The Commission had also engaged two technical/research teams and five Working Groups (WG), each one chaired by a Member of the Commission. These WGs followed the broad principles and approaches as approved by the Commission and examined the sector specific details and produced reports and draft laws thereon. The approach paper has been published on 4 October 2012. The final report was submitted in March 2013.

In the Union Budget 2013-14 (para 84) Government had delcared its intention to examine the recommendations of the Commission and act quickly and decisively so that India's financial sector stands on sound legal foundations and remains well-regulated, efficient and internationally competitive.

The Report is in two parts: Volume I – titled “Analysis and Recommendations” and Volume II – titled the “Draft Law” consisting of the Draft Indian Financial Code (IFC).

The recommendations of the Commission can broadly be divided into two parts, legislative aspects and non-legislative aspects. The legislative aspects of the recommendations relate to revamping the legislative framework of the financial sector regulatory architecture by a non- sectoral, principle-based approach and by restructuring existing regulatory agencies and creating new agencies wherever needed. To this effect the Commission has recommended a seven agency regulatory architecture, namely, Reserve Bank of India, Unified Financial Agency, Financial Sector Appellate Tribunal, Resolution Corporation, Financial Redress Agency, Public Debt Management Agency and Financial Stability and Development Council in the Draft law- Indian Financial Code to replace a number of existing laws. The non-legislative aspects of the FSLRC recommendations are broadly in the nature of governance enhancing principles for enhanced consumer protection, greater transparency in the functioning of financial sector regulators.

The non-legislative recommendations are taken forward under the aegis of FSDC.

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