Suggests setting up of a Monetary Policy Committee to determine the policy interest rate

A day after Reserve Bank of India Governor D. Subbarao’s observations made it clear that the apex bank and the government were not on the same page on ways of ensuring financial sector stability, the Finance Ministry on Thursday invited comments and suggestions from all stakeholders on the report of the Financial Sector Legislative Reforms Commission (FSLRC).

“All stakeholders concerned are requested to forward comments/suggestions that they may wish to submit on the report and its various recommendations by July 15, 2013 by e-mail [<feedback-fslrc@nic.in>] or in hard copy format to FSLRC Cell, Department of Economic Affairs, Ministry of Finance, Room No.-30, North Block,” an official statement said here. Interestingly, the Ministry’s move has come after a long gap. The Commission, headed by retired Supreme Court judge B. N. Srikrishna, presented its report to the government on March 22 this year and it was placed in the public domain on the Finance Ministry’s website on March 28.

In its report, the FSLRC had called for radical reforms in the financial sector with a total overhaul of the system by way of merging the oversight functions of all regulators of market, commodity, insurance and pension sectors. Justifying his recommendations, Justice Srikrishna, in his report, said: “By the year 2020-25, we hope to achieve $13-14 trillion economy. An ambition cannot be achieved unless there are steps taken towards it. Therefore, you need something that is drastic, something that is total overhaul of the existing financial system”.

Apart from calling for creation of a Unified Financial Authority (UFA) to subsume the functions of key regulators, the FSLRC also recommended the setting up of a Monetary Policy Committee to determine the policy interest rate.