FSLRC members handsomely “compensated” for their “contribution”

In a response to a Moneylife RTI, the Ministry of Finance has revealed that Rs4.72 crore of taxpayer’s money was spent on the members of the Financial Sector Legislative Reforms Commission-FSLRC. It is time to standardise compensation norms of those who provide policymaking inputs

A reply to Moneylife Right to Information (RTI) application revealed that the Financial Sector Legislative Reforms Commission (FSLRC) has spent at least Rs4.72 crore of taxpayer’s money since its inception in March 2011. It was also found out that some members were being paid huge amounts of taxpayer money for their “contributions”. For example, we found out that Justice (retd) BN Srikrishna, who used to be the judge for the Supreme Court and headed the FSLRC, was paid Rs40.53 lakh over three years for heading the Commission! 

Moneylife filed an RTI to find out how much of taxpayers’ money went into the Commission since inception. Here is what how much FSLRC members were being paid since the Commission’s inception in March 2011.

FSLRC Members

Paid  (Rs in lakh)

Justice (Retd) BN Srikrishna


Justice (Retd) Debi Prasad Pal


Dr PJ Nayak, ex-country head, Morgan Stanley


KJ Udeshi, ex-Deputy Governor, RBI


Yezdi H Malegam, practising accountant


Jayanth R Varma, academic


M Govinda Rao, academic


Late C Achuthan, ex-jusrist


Dhirendra Swarup, formerly ministry of finance


CKG Nair, Secretary, FSLRC


Bobby Parikh, Managing Partner, BMR & Associates


Raj Shekhar Rao, Advocate


Somasekhar Sundaresan, Advocate



The remuneration, fees and compensation is just one part of the expense paid to these members. We also found out that the FSLRC spent huge amounts of money on ferrying members to and forth, feeding and providing them with food/accommodation, reimbursement of office expenses and conveyance and “other assorted expenses” (whatever this means). The table below shows how much were spent on each of these expense heads, for each member of the FSLRC and its various working group committees, since March 2011:

Expenses Head

Total (Rs in lakh)



Food and Accommodation


Office expenses and conveyance


Other assorted expenses



Some of the members of the FSLRC are very well positioned in the commercial world and earning fat compensation or fees. For example, Dr PJ Nayak was the country head of Morgan Stanley at the time of his being appointed to FSLRC. This is a coveted position in a global firm, which would have fetched crores in compensation for Dr Nayak, a former bureaucrat. Yet, he had no problem in picking up a sizeable amount (Rs20 lakh) for his “services” to FSLRC. Another member, Jayant Varma, a well-known professor of Indian Institute of Management Ahmedabad-IIM-A (also, partly a taxpayer-funded institute), also got Rs20 lakh. Three others are part of flourishing professional-services firms.

While these handpicked “thought leaders” probably deserved to be compensated for their contribution to policy making, even though the report may only gather dust, our RTI application also revealed that there was no compensation policy in place. Other well-known personalities like Aditya Puri, Ravi Narain, Janmejeya Sinha and Naina Lal Kidwai were paid nothing for their work as members of working groups. In fact, members of the Working Groups of FSLRC were not paid at all.

Indeed, there is no standardisation on how these committees are formed and how much members should be paid, if at all, for a service, which is not commercial and in the nature of public service. For instance, while this was a Commission, which had a very wide canvas in trying to suggest sweeping legislative changes, there have been many important committees set up by various regulators where members were paid nothing for their public service. Members of SEBI’s Advisory Committees (primary market, secondary market and mutual funds) are not paid anything either. Until now, members to these committees saw some honour and prestige in serving as members. Many from the industry also saw this as a tool to network and further their business interests. Now, they can expect direct fat compensation as well, apart from indirectly exploiting their public-service role.

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    Deepak Gupta

    7 years ago

    The time duration for which the compensation was paid, is mentioned only for Justice Srikrishna. It is mentioned as 3 years. So, 40Lacs comes to just about 13Lac per year.

    For a person of his eminence and experience, that is hardly a pay that anyone will complain about.

    The real problem here is the absence of clear guidelines for such appointments. This may create room for misuse in the future, and should be taken care of.

    That four members of the commission have written dissent notes - how is that relevant to the compensation paid to them? I'm sure you are not suggesting that people should not not dissent (so, leave their honest opinions behind and become yes men) only because they are being paid for their time?

    Vinay Shah

    7 years ago

    The entire report is the brain-child of Ajay Shah. It is he alone who had laboriously drafted the report. What was the compensation received by him?


    7 years ago

    In the history of independent India FSLRC was probably the 2nd largest undertaking in writing new laws. This was an immense project with had a dedicated research team working full time for 2 years. How can you question their compensation?

    What you should be questioning is why the report is 'gathering dust' after so much money being spent. Not why this money was spent to begin with.


    Sucheta Dalal

    In Reply to Parikshit 7 years ago

    Yes we can question their compensation. Many who have drawn lakhs of rupees hold full time jobs, where their annual earnings are in crores.
    On the other hand many of us have served on innumerable committees where even our conveyance is not paid.
    We need to know the basis on which these decisions are made. The basis on which consultants and lawyers are selected and who they decided to engage with and who they leave out.
    The biggest surprise is this -- the four key members of the FSLRC have written dissent notes. What on earth kind of report is this? Who dictated the final report? Who dominated it so much that industry leaders were reduced to writing separate dissents?
    There is a lot about the FSLRC that is not transparent and we would like to know what really happened during the deliberations.

    G A Joseph

    7 years ago

    This report raises one ominous question. Is there not even one big man in our country who is willing to do something for the nation after retiring from high positions. If their rise to top positions has only add to their greed for money and they continue to seek more money after retirement selling their opinions, it is high time that post retirement engagements be made on honorary basis so that persons with social commitment and love for the country and its institutions come forward to provide guidance. Else let serving officials form committees and prepare policy documents. One is at a loss to understand what precious thing retirement adds to the wisdom and knowledge of these people that the society pays so heavy a price for this immeasurable commodity.

    nagesh kini

    7 years ago

    Great report Aditya!
    Pray what is the fate of the ground level implementation of this report? The MOF ought to come clean more particularly on the dissents.
    While reimbursement of the actual out-of-pocket expenses is OK as also the travel and stay what is the criterion for the fat remuneration?
    Most of the inputs will have come from the equally distinguised members of the working groups but they get nothing?


    MG Warrier

    In Reply to nagesh kini 7 years ago

    Nagesh Kini

    Your concern about dissent is shared by many. In my article on FSLRC published by Moneylife.in, I observed:
    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 already pushed the present regulators and supervisors to a confused state.

    P J Nayak, inter alia observed in his dissenting note asunder:
    “The Commission now arrests and partly reverses this directional movement, and it is with apprehension that one must view the very substantial statutory powers recommended to be moved from the regulators (primarily RBI) to the finance ministry and to a statutory FSDC, the latter being chaired by the finance minister. The Commission has recommended that direct statutory powers be vested in the government in matters of (i) Capital Controls and (ii) Development. The statutory empowerment of the FSDC encompasses (iii) Inter-Regulatory Co-Ordination; (iv) Identification and Monitoring of SIFIs; and (v) Crisis Management. This transfer of powers collectively constitutes a profound shift in the exercise of regulatory powers away from (primarily) RBI to the finance ministry. The finance ministry thereby becomes a new dominant regulator.

    “To rearrange the regulatory architecture in this manner, requiring new institution-building while emasculating the existing tradition of regulators working independently of the government, appears unwise. There is no convincing evidence which confirms that regulatory agencies have under performed on account of their very distance from the government; indeed, many would argue that this distance is desirable and has helped to bring skills (and a fluctuating level of independence) into financial regulation.”

    No point in doing an MRI of FSLRC report or the dissenting notes. Application of “collective wisdom” is conspicuous by the absence in the whole affair. Some vested interests are itching for a truncated central bank with diminished role with no say in the non-bank financial sector, the government securities market and the foreign exchange market. This implies that the RBI would have no say in the management of the exchange rate and thereby in the forex reserves. Add to this the Commission’s view on government debt management. The Commission opts for a separate Debt Management Office (DMO), totally separated from the RBI, which is the dispensation North Block has been trying to push and RBI has been resisting for valid reasons for a long time now.


    7 years ago

    has there been a change in govt rules in, certain cases, that
    it is allowed to function like companies-where 'sanction by appropriate person' is more important than the 'propriety aspect' ?

    MG Warrier

    7 years ago

    Transparent norms for compensation packages, where public funds are involved (Here no need to get confused about the meaning of public funds- Organisations dependent on funds from public, whether as tax or as share capital contribution are all handling public funds and have only ‘Trusteeship’ rights on the resporces) need to be evolved. Thank you Moneylife for exposing the absence of any norm in this area.

    SEBI finalises easier norms for foreign investors

    SEBI's measures come at a time when concerns are being raised about outflows of foreign capital and weakening of the rupee against the dollar and other foreign currencies

    Market regulator Securities and Exchange Board of India (SEBI) will soon notify new rules to make it easier for foreign entities to invest in Indian markets. SEBI's move follows finalisation of the necessary regulatory changes by the union government for a major overhaul of the existing regulations for overseas investments.


    Under the new rules, which are likely to be announced in the next few days, SEBI is creating a new class of investors — to be called foreign portfolio investors (FPIs) and would classify them in three categories in line with their risk profile.


    The know your client (KYC) and other regulatory compliance requirements for the FPIs would depend on their risk category and the norms would be easier for lower-risk investors.


    The proposals are based on the report of KM Chandrasekhar Committee and were approved by SEBI in its board meeting in June. Thereafter, the regulator referred the recommendations to the union government for implementation.


    SEBI is merging different classes of investors such as foreign institutional investors (FIIs), their sub-accounts and qualified foreign investors (QFIs) into a new category FPIs, to put in place a simplified and uniform set of entry norms for them.


    The FPIs would be categorised into three categories — low-risk (for multilateral agencies, Government and other sovereign entities), moderate risk (for banks, asset management companies, investment trusts, insurers, pension funds and university funds) and high-risk (all the FPIs not included in the first two categories).


    The third-category of FPIs would not be allowed to issue participatory notes.


    The KYC requirements would be the simplest for the first category and most stringent for the third class.


    The submission of personal identification documents of the designated officials of the FPIs would also be done away with for the first two categories.


    These measures come at a time when concerns are being raised about outflows of foreign capital and weakening of the rupee against the dollar and other foreign currencies.


    The new norms are expected to make it much easier for foreign investors to enter the country and make investment decisions.


    The regulator had earlier sought certain changes in the provisions of the Prevention of Money Laundering Act, as also in the norms for taxation responsibility under the FPI regime, to facilitate the framing of new norms.


    According to the new regulations, any portfolio investments would be defined as investment by any single investor or investor group if they do not exceed 10% of the equity of an Indian company.


    Besides, any investment beyond the threshold of 10% would be considered as foreign direct investment (FDI).

  • User 

    Vigil mechanism: Will it lead to overdrive of vigilance under new Companies Act?

    By mandating vigil mechanism for companies with borrowing of Rs50 crore, the Ministry has unnecessarily regulated such companies which may in nature be closely held companies, in which such a need may not arise at all

    In what had been only recommended for listed companies, the Companies Act, 2013 (the Act) now prescribes vigil mechanism for listed company and such classes of prescribed companies to put in place a mandatory vigil mechanism for directors and employees.


    According to a study by Association of Certified Fraud Examiners in their 2012 Global Fraud Study, a typical organization loses 5% of its revenues to fraud each year. In addition, nearly half of victim organisations do not recover any losses. In what is even more alarming discovery is that it took 18 months for frauds to be reported from the time it first occurred.


    Whistle blowing – elsewhere and in India


    In the US, Section 806 of Sarbanes Oxley Act, 2006 requires every public company to provide a whistle blowing mechanism to all its employees. In UK, the Public Interest Disclosure Act, 1998 protects workers that disclose information about any suspected malpractice at the workplace.


    In the Indian context, Equity Listing Agreement under Annexure 1D of Clause 49 required listed companies to put in place a whistle blower policy and the Audit Committee was to review the working of the same.


    The draft rules issued by Ministry of Corporate Affairs on 9 September 2013, under para 12.5 of Chapter XII, has prescribed vigil mechanism for:


    1. Listed companies
    2. Companies which accept deposits from the public; and
    3. Companies which have borrowed money from banks and public financial institutions in excess of Rs50 crore


    What is alarming is the scope envisaged for vigil mechanism by virtue of point 3 as stated above. By prescribing vigil mechanism for companies with borrowing of Rs50 crore, probably, very few companies have been left out of the ambit of establishing vigil mechanism. This on one hand can be viewed positively as it gives an option to employees and directors to detect and report genuine concerns to companies and also be guarded against any victimization as a result of such disclosure.


    What is voicing of genuine concern?


    Surprisingly, genuine concern has not been defined. Under the Public Interest Disclosure Act, 1998, workers are free to report even on suspected criminal activities. In fact, section 43B of this law, even allows workers to disclose regarding any injustice or endanger of health or safety of any individual.


    In its zeal to bring out rules, the Ministry has left out the scope for blowing of the whistle. Although, it allows reprimanding any director or employee against any frivolous complaints, yet it is a matter of subjectivity when it comes to voicing any concern, which can be termed as genuine and the new Companies Act and the rules are silent on this.


    What the rules has done is in fact placed additional burden on companies, which require setting up of a vigil mechanism. When exposure to banks has been prescribed as an applicability criterion, this only means that even where irrespective of whether any public interest is involved or not, vigil mechanism has to be instituted.


    The very reason for setting up a vigil mechanism is to rule out any emblazonment of funds of a company or any other prejudicial act, in which any stakeholders’ interest or most importantly, public interest is involved.


    In this day and age, borrowing from companies to the extent of Rs50 crore will possibly filter out very few companies from this applicability. Further, by mandating vigil mechanism for companies with borrowing of Rs50 crore, the Ministry has unnecessarily regulated such companies which may in nature be closely held companies, in which such a need may not arise at all.


    (The writer can be contacted at [email protected] )

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    Vinay Joshi

    7 years ago

    Rajat Gupta was freed on bail bond of US$10mn, who was to begin his two year prison term Jan8'13.

    The entire American corporate people then had appealed to the Judge for a lighter sentence. One should be knowing all the case details.

    Ms.Nivedita as a student blogger i appreciate your knowledge of Corporate Law & comments.

    Certain other aspects of SEC also you have to be well versed, Goldman Sachs paid $550mn without admitting or denying wrongdoing to settle allegations. The biggest corporate settlement.

    Since then, [2010]SEC short of powers & budget got strengthened. It offered lucrative rewards to whistle blowers.

    The SEC didn't pursue several prominent banks in complex debt derivatives which got down the US economy.

    SEC is also clamouring for more powers, experts & analysts are against SEC allowing firms to settle without admitting wrongdoing.

    Let us get back to our MCA draft rules for comments & its further proposed sections.


    nagesh kini

    7 years ago

    The Market Regulator in SEBI, the ROC and MCA have to rise to stronger implementation and enforcement of the provisions of the laws as they exist.
    Initiating strong penal action with heavier punitive damages and a tough jail term for the violators, as was done with Rajat Gupta and earlier on the Enron chief should bring out that the authorities are indeed blood hounds and not mere watch dogs that can neither bark and not bite - time to bare their teeth.

    Vinay Joshi

    7 years ago

    Ms.Nivedita Shankar,

    The draft rules are open for comment & suggestion a per 16 Chapters released by MCA on Sept9.
    [The Bil got Prez assent Aug29.]

    Further what is required is to stop weaving web of co's willfully / fraudulently being subjected as NPA's.

    Nivedita S /CA Vinod Kothari, Finance bill'13 had put a cap on share loss MSE but with intricate aspects & that was also seen as strangulating as it can restrict capital flow. For the genuine only.

    Nivedita S /CA Vinod Kothari, in aspects to check corporate frauds further mechanism will be in place with centralized data system. The measures will be implemented in a months time & in all probabilities will be incorporated in the ensuing finalization of Cos, Act.

    How do you curb rising NPA's, restructuring, pledging?

    THESE DRAFT RULES HAVE TO BE ENFORCED! The consultation papers have provisions for all new 98 sections added / amended.


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