India Panel Recommends Rates Committee, Combining Regulators

An Indian panel recommended an independent debt management office for the government and a monetary policy committee to set interest rates as part of reframing rules and streamlining policy making.

A report released by the Financial Sector Legislative Reforms Commission today also suggested a separate regulator for banks and financial institutions, and a single entity for the insurance and pensions industry and the markets instead of the three separate ones now.

“The existing Securities and Exchange Board of India, Insurance Regulatory and Development Authority and Pension Funds Regulatory and Development Authority will be merged into a new unified agency,” the report said. The recommendations aren’t binding on the government.

India constituted a panel in 2011 to suggest changes to the legal structure that underpins the Indian financial sector. Multiple laws, some dating back to the colonial period, have failed to keep pace with innovations and have led to disputes between regulators over jurisdiction.

The panel, headed by Justice Srikrishna, recommended the creation of a seven-member monetary policy committee to determine the benchmark interest rate, including periodical meetings. The Reserve Bank of India governor sets borrowing costs under the present system after advice from a technical advisory committee.

India’s insurance regulator in 2010 sought legal advice on whether the Securities and Exchange Board of India had jurisdiction over insurers offering products linked to stocks. The law governing the functioning of the Reserve Bank of India was formulated in 1934 while the Insurance Act was implemented in 1938.

A separate debt management office may also free up the RBI from managing the government’s bond sales.

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