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The Finance Ministry has come up with a revised draft of the Indian Financial Code (IFC) and sought stakeholders’ comments on the same by August 8.
The latest draft among other things recommends setting up of a seven member Monetary Policy Committee (MPC) to decide on policy rate by majority vote.
Four of these members will be appointed by the Government. The Reserve Bank of India (RBI) Governor should head this panel, the revised draft IFC has suggested.
Also, the RBI Governor will have the casting vote in the panel.
The RBI will nominate two members to this committee.
Many economy watchers cheered this recommendation of the revised draft IFC as it will allow Government to have majority in the panel.
This could mean push for growth as the final decision of the MPC will be binding on the central bank.
The other key modifications made in the revised draft include strengthening the financial accountability of financial agencies, removing the provision empowering Financial Sector Appellate Tribunal (FSAT) to review regulations, rule making and operational aspects of capital controls and regulation of systemically important payment system and others.
The initial draft of IFC –submitted in March 2013--has now been revised in the light of the comments received from public and all other stakeholders.
The latest modifications to the draft IFC also factors in enactments subsequent to the submission of the Financial Sector Legislative Reforms Commission (FSLRC) report i.e the Pension Fund Regulatory and Development Authority Act and Securities Laws (Amendment) Act 2014.
However, the modifications in the revised draft IFC remain consistent with the overall structure and philosophy of the FSLRC report, an official release said.
The FSLRC was set up on March 24, 2011 for re-writing the financial sector laws to bring them in harmony with the current requirements.
The report was submitted to the Government on March 22, 2013.
FSLRC had recommended a non-sectoral, principle-based legislative architecture for the financial sector, by restructuring existing regulatory agencies and creating new agencies, wherever needed for better governance and accountability.
srivats.kr@thehindu.co.in
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