The Finance Bill recommendation giving money market control to Securities and Exchange Board of India (Sebi) has come as a surprise, said Justice BN Srikrishna, Chairman, Financial Sector Legislative Reforms Commission (FSLRC).
The government has recently proposed to amend the Reserve Bank of India (RBI) Act to take away money market regulatory powers from the central bank and bring it under the purview of market regulator Sebi.
Though the proposal wasn’t mentioned in Finance Minister Arun Jaitley’s Budget speech, the Finance Bill proposes to amend Sections 45U and 45W of the RBI Act, which take away the apex bank’s powers to regulate government securities and other money market instruments.
In an interview to CNBC-TV18’s Ritu Singh, Justice Srikrishna, said the government has started tapping the low-hanging fruits to strengthen the financial regulatory framework. He feels an agreement between the government and RBI about inflation targeting is a good step and that the new monetary policy framework makes RBI accountable for its actions.
He, however said the Finance Bill recommendation came as a surprise and feels the matter remains fluid as of now. “There are some high level discussions going on between the RBI Governor and Finance Minister to clarify this,” he said.
Speaking on the Sebi and FMC (Forward Markets Commission) merger, Justice Srikrishna said he expects it to come through in the Monsoon Session of Parliament. “A formal legislation has to be moved for a clear cut merger and roles to be clearly defined,” he said, adding, “our recommendation is that each regulator should be completely autonomous.” Sebi needs a lot more powers to deal with FMC issues, he said.
Discussing on the Monetary Policy Committee (MPC), Justice Srikrishna said it should be chaired by the RBI Governor with a majority of independent representatives. “RBI governor should have a veto power in the MPC,” he said.
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