The setting up of the Financial Sector Legislative Reforms Commission (FSLRC) was announced by the Government of India in its 2010-11 budget vide a resolution dated March 24, 2011. The commission was formed mainly with a view to re-examine and recast laws in the Indian financial sector so as to tune them to the current requirements. With effect from the date of formation, the tenure of the commission was determined to be 2 years.
The legal framework comprising more than 60 Acts and several rules and regulations that governs the Indian Financial sector is age old. For instance, Securities Contract Regulation Act or SCRA came into effect in 1956 while the Insurance Act and RBI Act date back to 1938 and 1934 respectively. Several changes made in a bit by bit fashion over time in these Acts only rendered the system more complex and vague. However, with globalization change in the Indian financial landscape brought about the requirement for an overhaul of this legal and institutional set-up.
Thus, the commission was set up for working towards simplifying and re-writing legislations thereby eliminating ambiguity and regulatory gaps among several laws to result in more dynamic structure in coherence with the current financial sector framework of the country that is interconnected with the global financial world.
The formation of the commission was anticipated to result in next-generation reforms that would make financial intermediation more effective and at the same time increase growth potential of the country.
In a recent development, RBI in its second quarterly monetary policy review, proposed to implement suggestions put forth by the FSLRC commission in relation to consumer security and capacity building in the financial world. In this connection, the apex body also stated the announcement of consolidated instructions with regard to consumer services in the sector in near future.