Citizens' Issues
Ministry Decides to selectively act on FSLRC recommendations

We are likely to get confused & schizophrenic financial regulation

 

Even before finance minister, Arun Jaitley, was discharged from hospital, his ministry quietly put out a press release announcing the formation of four task forces to implement the financial sector roadmap, prepared by the FSLRC (Financial Sector Legislative Reforms Commission) under the Congress-led United Progressive Alliance (UPA) government. Essentially, they will chalk out the path to create four new agencies: the Financial Sector Appellate Tribunal (FSAT), Resolution Corporation, Public Debt Management Agency (PDMA) and Financial Data Management Centre (FDMC). 

 

The Economic Times reports, quoting unnamed finance ministry sources, say that Reserve Bank of India’s (RBI’s) decisions will be kept out of the purview of FSAT. Does this mean that the finance ministry, under the BJP, will stop trying to control RBI using FLSRC’s recommendations as a cover? If so, why doesn’t the finance ministry’s press release provide a clear indicator, instead of resorting to media leaks? 
 
One may recall that RBI governor, Dr Raghuram Rajan, had scathingly termed several of FSLRC’s recommendations as ‘somewhat schizophrenic’ as well as “faddish and impressionistic rather than based on deep analysis.” Worse, half the members of FSLRC, headed by Justice BN Krishna, had penned dissent notes to the report –YH Malegam (who is the most indispensable man in the Indian financial system having served as a director on the central board of RBI for 20 years), Dr PJ Nayak (founder chairman of Axis Bank) and Kishori Udeshi (the first woman deputy governor of RBI). One will have to wait and see whether these have really had an impact, or whether the Modi sarkar too will quietly work to cut RBI’s autonomy. 
 
Debashis Basu wrote in Business Standard that the new task forces make no mention of the new Unified Financial Regulatory Agency (UFRA). Immediately, there was another media leak that a half-way house is still on with plans to merge the Forward Markets Commission with SEBI (Securities & Exchange Board of India).
 
This suggests that the pension regulator and insurance regulator will also remain independent.
 
That these details are conveyed through media leaks from the finance ministry is again reminiscent of the UPA. 
 
Finally, let’s come to what former RBI deputy governor Dr KC Chakrabarty had described as a holy trinity—financial inclusion, financial education and consumer protection. Financial inclusion is on in full force to fulfil the prime minister’s Jan Dhan target. Financial education is mainly in the form of superficial advertisements and boring seminars funded by bourses, regulators and the ministry of corporate affairs. But, when it comes to consumer protection, there is no interest and no action. 

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COMMENTS

MG Warrier

2 years ago

With reference to the report ‘Don’t Turn Regulators into Paper Tigers: Rajan’ (Economic Times, June 18, 2014) I had responded asunder:.
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.
Last week, there was a report in Business Standard that in the new Monetary Policy Committee, RBI Governor may get veto power(which he enjoys under the present dispensation). My response published by Business Standard is copied below:
Beyond ‘give and take’
This refers to the report “RBI governor might get veto in price stability mechanism”(October 10). While such gestures to calm dissent are normal in governance, the recent initiatives from the finance ministry, including the hurry with which some of the recommendations of the Financial Sector Legislative Reforms Commission are being pushed through for implementation, gives an impression that new dispensation in Delhi has not fully recovered from the hang over of the previous coalition government’s ‘give and take’ approach in decision making.
It would be an unhealthy message to the regulators and all stakeholders in the financial system, if such ‘concessions’ to RBI and its present governor appear to be a privilege available in certain situations. There is a chance of lesser mortals among regulators becoming less amenable to government’s guidance.
Government should not shy away from normal procedures and parliamentary debates before implementing measures of long term implications to the economy. The sooner the transparency in policy formulation and respect to legislative processes and procedures are restored, the better for the country.
M G Warrier, Mumbai

Flipkart gets notice from ED on Big Billion Day sale

According to reports, the ED is probing whether Flipkart had violated any retail norms during its Big Billion Day sale and may impose stiff penalty on the online retailer if found guilty

 

The Enforcement Directorate (ED) has issued notice to online shopping portal Flipkart questioning over their recent billion day sale. The ED may also impose a penalty of Rs1,000 crore on Flipkart says media reports.

 

Quoting sources, NDTV in a report said, the agency is "discreetly inquiring into" whether the company has flouted any retail rules during the single-day sale held on 6th October.

 

Flipkart's 'Big Billion Day' sale on 6th October had offered steep discounts on various products, raising concerns among small and big traders that such campaigns would badly affect players in the traditional retail market.

 

After receiving "many complaints" from traders on Flipkart's massive discount sale, last week, the union government said that it will look into the concerns and take a call on whether more clarity is required on e-commerce retail business.

 

"We have received many inputs. Lot of concerns have been expressed. We will look into it," Commerce and Industry Minister Nirmala Sitharaman told reporters.

 

Flipkart has said that its 'Big Billion Day' sale saw 1.5 million people shopping at its portal. It also claimed that products worth over Rs600 crore were sold in just 10 hours under the scheme.

 

Earlier this week, Confederation of All India Traders (CAIT) had demanded the Commerce and Industry Ministry take steps to monitor and regulate online businesses.

 

The CAIT has also sought a probe into the business model and trade practices of e-commerce companies to find out how they are offering huge discounts during the ongoing festive season.

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COMMENTS

Abhijit Gosavi

2 years ago

Amazing; has Flipkart borrowed money from the govt.? Have they evaded taxes? If yes, then go after them, otherwise, their own money is their own money (and of those who are investing in them). Just my two paise.

REPLY

Abhijit Gosavi

In Reply to Abhijit Gosavi 2 years ago

Disclaimer: I haven't invested in Flipkart or any other Indian stock :)

Sunil Pratap

2 years ago

So we can not believe even the media??? What next?

TIHARwale

2 years ago

This a fake news created and blown by CNN IBN where Reliance Industries Ltd has substantial stake and who own the retail chain Reliance Retail. RIL like any other retailer is facing hit owing to Flipkart sale and on going week long sale dhamka of Amazon.com

TIHARwale

2 years ago

This a fake news created and blown by CNN IBN where Reliance Industries Ltd has substantial stake and who own the retail chain Reliance Retail. RIL like any other retailer is facing hit owing to Flipkart sale and on going week long sale dhamka of Amazon.com

TIHARwale

2 years ago

This a fake news created and blown by CNN IBN where Reliance Industries Ltd has substantial stake and who own the retail chain Reliance Retail. RIL like any other retailer is facing hit owing to Flipkart sale and on going week long sale dhamka of Amazon.com

TIHARwale

2 years ago

This a fake news created and blown by CNN IBN where Reliance Industries Ltd has substantial stake and who own the retail chain Reliance Retail. RIL like any other retailer is facing hit owing to Flipkart sale and on going week long sale dhamka of Amazon.com

TIHARwale

2 years ago

This a fake news created and blown by CNN IBN where Reliance Industries Ltd has substantial stake and who own the retail chain Reliance Retail. RIL like any other retailer is facing hit owing to Flipkart sale and on going week long sale dhamka of Amazon.com

Indian market trends

The Sensex and the Nifty ended flat during the fortnight ended 9 October 2014. ML Mid-cap Index and ML Small-cap Index advanced 3% each. ML Large-cap Index rose 2%. ML Mega-cap Index went up by 1%.

 

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