The Reserve Bank of India (RBI) has opposed the proposal of Financial Sector Legislative Reforms Commission (FSLRC) to form a super-regulator for the financial sector citing various reasons including lack of focus and unconvincing results in the foreign countries following the same practice.
According to a media report, RBI has also opposed the proposal to restrict its powers in debt management and to interfere with the mechanism to oversee forex movements.
The commission headed by Justice B N Srikrishna, in its final report last week, said the Unified Financial Agency (UFA) would yield benefits in terms of "economies of scope and scale in the financial system."
"UFA would take over the work on organised financial trading from RBI in areas connected with the bond-currency-derivatives nexus, and from FMC (Forward Markets Commission) for commodity futures, thus giving a unification of all organised financial trading including equities, government bonds, currencies, commodity futures and corporate bonds", it added.
However, RBI is not convinced with Srikrishna's idea. "At present, the jurisdiction of Reserve Bank extends over critical economic pricing variables like money market interest rates, medium to long-term interest rates and exchange rates. These rates have a bearing on monetary policy function. Since the Commission proposes to continue monetary policy with Reserve Bank, it is necessary that the regulatory jurisdiction over these (G-Sec, Bond and forex) markets continues with Reserve Bank," said RBI in a letter.