The Reserve Bank of India set up a committee to look at the various facets of household finance in India and benchmark India’s position against both the peer countries and advanced countries. The terms of reference of the panel include suggestions to benchmark the current depth of household financial markets in India vis-a-vis those in other major world markets and identify areas of priority for growth and change. It will also characterise and evaluate Indian households’ demands in formal financial markets (for assets such as pensions as well as liabilities such as home loans) over the coming decade. The panel will also consider whether, how, and why the financial allocations of Indian households deviate from desirable financial allocation and behaviour (e.g., the large household allocation to gold). It will evaluate the design of new systems and the redesign of existing systems of incentives and regulations to encourage and enable better participation by Indian households in formal financial markets. The panel will assess the role of new financial technologies and products — like robo-advising, automatically refinancing mortgages — in the cost-effective provision of high-quality and suitable financial products to Indian households while containing risks.
The report can be found on the RBI website here.
The Financial Sector Legislative Reforms Commission was constituted by the Government of India, Ministry of Finance, in March, 2011. The setting up of the Commission was the result of a felt need that the legal and institutional structures of the financial sector in India need to be reviewed and recast in tune with the contemporary requirements of the sector. The institutional framework governing the financial sector has been built up over a century. There are over 60 Acts and multiple rules and regulations that govern the financial sector. Many of the financial sector laws date back several decades, when the financial landscape was very dierent from that seen today. For example, the Reserve Bank of India (RBI) Act and the Insurance Act are of 1934 and 1938 vintage respectively. Financial economic governance has been modified in a piecemeal fashion from time to time, without substantial changes to the underlying foundations. Over the years, as the economy and the financial system have grown in size and sophistication, an increasing gap has come about between the requirements of the country and the present legal and regulatory arrangements. Unintended consequences include regulatory gaps, overlaps, inconsistencies and regulatory arbitrage. The fragmented regulatory architecture has led to a loss of scale and scope that could be available from a seamless financial market with all its attendant benefits of minimising the intermediation cost. A number of expert committees have pointed out these discrepancies, and recommended the need for revisiting the financial sector legislations to rectify them. These reports help us understand the economic and financial policy transformation that is required. They have defined the policy framework within which reform of financial law can commence. The remit of the Commission is to comprehensively review and redra the legislations governing India’s financial system, in order to evolve a common set of principles for governance of financial sector regulatory institutions. This is similar to the tradition of Law Commissions in India, which review legislation and propose modifications. The main outcome of the Commission’s work is a draft ‘Indian Financial Code’ which is non-sectoral in nature (referred to as the draft Code throughout), which is in Volume II of the report and replaces the bulk of the existing financial law.