Chidambaram invokes FSLRC; says govt will review RBI’s powers

Union finance minister P Chidambaram is back on his old theme of restricting the powers of the Reserve Bank of India, saying the government would review RBI's powers, in line with the recommendations of the Financial Sector Legislative Reforms Commission (FSLRC).

The FSLRC has proposed a unified control mechanism for the financial sector, which would include the RBI, Unified Financial Agency, Financial Sector Appellate Tribunal, Resolution Corp, Financial Redressal Agency, Public Debt Management Agency and the Financial Stability Development Council.

Under the regulatory model proposed by the FSLRC, the central bank will be the monetary authority, banking regulator and payment system regulator.

There will be unified regulator, called Financial Stability Development Council (FSDC), for the rest of the financial sector, including a deposit insurance-cum-resolution agency, a public debt management agency, a financial redressal agency, a financial sector appellate tribunal, a mechanism for coordination, systemic risk, financial development and other issues where the role of multiple agencies are involved.

''RBI is the monetary authority and will regulate banks. But all other functions should be revisited and we should ask ourselves whether RBI is the best authority to discharge those functions or is there any other authority in the system which can take over that function or is it necessary to create a separate authority,'' he said at the 20th anniversary of the National Stock Exchange in Mumbai.

He said the government is carrying out a consultation-cum-taskforce approach for implementing the FSLRC recommendations.

''The government will make a beginning by implementing the non-legislative recommendations of the reforms commission while simultaneously working on legislation,'' said Chidambaram.

''It will take time. It is a complex process. You do not know the trauma we undergo for getting bills passed in Parliament,'' he added.