- RBI governor Raghuram Rajan is of the opinion that excessive legal supervisions on financial regulators, such as the creation of a Financial Sector Appellate Tribunal as recommended by the Financial Sector Legislative Reforms Committee (FSLRC), will hamper policy-making and increase systemic risks.
- This is because Tribunals may have to interfere often and participants may exploit loopholes to check the regulator which may reduce its very purpose.
- He said that Tribunals should deal with issues relating to administrative decisions such as the size and proportionality of penalties as they lack the capability, experience, or information to make finance related judgements relating to policy or the functionality of the RBI.
- He was also critical of the merging of all regulation of trading under a new Unified Financial Agency, so that the Forward Markets Commission, the Securities and Exchange Board of India (SEBI) and as well as the bond regulation activities undertaken by the RBI, would move under a new roof.
- This is because regulation of bond trading right now will adversely affect the growth of the govt bond market and the process of liquidating the bonds across the spectrum.
- He also said that RBI would give up powers and assist the govt in deputations if the govt wants to manage its own debts.
- Read at: http://www.thehindu.com/todays-paper/tp-business/avoid-excessive-legal-supervision-on-financial-regulators-rbi/article6124650.ece
Exams Perspective:
- Financial Sector Legislative Reforms Committee (FSLRC)
- Financial Sector Appellate Tribunal
- Article 323A & 323B
- Forward Markets Commission
- Bond Market