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The Indian Financial Code
The Government of India has gone against the spirit and content of the comprehensive recommendations of the 2013 report of the Financial Sector Legislative Reforms Commission. It has revised the commission's draft Indian Financial Code (which had its own pluses and minuses) with a second draft code which, among other things, will lead to a greater centralisation of powers with the government and a weakening of the independence of the Reserve Bank of India. This is best illustrated in the recommended composition and powers of the Monetary Policy Committee. The finance ministry cannot hide behind the claim that this is a draft code; the revised draft IFC has been drawn up within the ministry.
1 Introduction
The Financial Sector Legislative Reforms Commission (FSLRC), set up by the central government in March 2011, submitted its report in two volumes in March 2013. This was done after two years of painstaking efforts at studying the existing complex legal structure governing the Indian financial sector with an attempt to reframe it to bring in harmony with the requirements of a modern, integrated, competitive and well-governed financial system. The commission provided a draft Indian Financial Code (IFC–1) in the second volume based on its analysis and recommendations in the first volume. The analysis and recommendations of the FSLRC were an outcome of extensive consultations with all stakeholders, economists and policy practitioners in India as well as abroad. These laid down certain basic principles, such as prominence to consumer protection, independence of regulators, including the Reserve Bank of India (RBI), and the proposed Public Debt Management Agency (PDMA). This is the good part of IFC–1.
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