The Financial Sector Legislative Reforms Commission has exploited its ambiguous terms of reference to suggest a complete revamp of financial regulation. The recommendations, if accepted, would shift power from Parliament to “independent” bodies run by nominated experts and subject to scrutiny by a legal framework that might be capable of judging fairness of regulatory reach but not its appropriateness from the point of view of development. This is no legislative reforms commission but a commission that is serving as a vehicle to legalise a regulatory structure suited to a liberalised financial sector.

In March this year, two years after its constitution, the Financial Sector Legislative Reforms Commission (FSLRC, chaired by Justice B N Srikrishna) submitted its two-volume report. While the commission’s title seems limited in terms of remit, its report is indeed far-reaching. Exploiting the rather wide and ambiguous terms of reference set for it, the FSLRC has chosen not to restrict itself to recommending amendments to existing legislation and the enactment of marginal new laws to modify the historically evolved legal framework. It is indeed necessary to excise redundancies in the legislation, address conflicting mandates, close gaps and accommodate new features in financial markets. However, the FSLRC has chosen to abjure piecemeal “amendments to the existing legislations” and has opted to design “a new institutional foundation for the aspiring, future Indian economy” involving “a full-scale revamp” of the framework of financial regulation.