Lok Sabha Question No. 1823 (UNSTARRED), answered on 2016-11-25
Subject: FSLRC
Ministry: FINANCE
Asked by: R. PARTHIPAN

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF ECONOMIC AFFAIRS

LOK SABHA

## UNSTARRED QUESTION NO. 1823

## TO BE ANSWERED ON 25th NOVEMBER 2016

## QUESTION FSLRC

## 1823. SHRI R PARTHIPAN:

Will the Minister of FINANCE be pleased to state:

(a) whether the Government has implemented the recommendations of Financial Sector Legislative Reforms Commission (FSLRC);

the details thereof; if s0,

(c) whether  the  Government has made   amendments in the banking   sector  laws in  keeping with the recommendations; and

(d) if the details thereof and the number of such amendments carried out in this regard? SO,

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE

## (SHRI ARJUN RAM MEGHWAL)

(a) and (b); The following actions have been taken the recommendations of the Financial  Sector Legislative Reforms Commission (FSRLC):

2) The Forward Markets Commission has been merged with the Securities and Exchange Board of India (SEBI) with effect from 29th September; 2015 to achieve convergence of regulations of securities market and commodity derivatives market:

1) The existing   financial   sector regulatory agencies are implementing the governance enhancing recommendations that can be adopted without legislative changes; on & voluntary basis.

3) A 'Financial Sector Regulatory Appointment Search Committee' (FSRASC) has been constituted on 24.11.2015 for recommending names of suitable persons for appointment to board level positions of financial sector regulatory bodies.

4) In pursuance to the  recommendation of the FSLRC for evolving a new financial regulatory Trchitecture , the Government set up four Task Forces for upgrading the existing Securities Appellate Tribunal (SAT) to Financial Sector Appellate Tribunal (FSAT) and for establishing new agencies namely, the Resolution Corporation (RC) the Public Debt Management Agency (PDMA) and the Financial Data Management Centre (FDMC) on 3Oth Sept 2014. These Task Forces submitted their reports in June 2015. The Task Force set up on 5.6.2015 for creating sector-neutral Financial Redress Agency (FRA); as announced in the Budget Speech 2015-16, submitted its Report to the Government on 30.6.2016.

In the context of up the RC as recommended by FSLRC, it was announced in the Budget Speech of 2016-17 to frame a comprehensive Code on Resolution of Financial Firms and introduce it as a Bill in the Parliament 2016-17. A Committee for framing a Draft Code on Resolution of Financial Firms was accordingly set up 0n 15,3.2016. The Committee submitted its Report and a Draft Bill, titled *The Financial Resolution and Deposit Insurance Bill, 2016' on 21.9.2016. A each of the Report and the Draft Bill and an explanatory note explaining the copy legal provisions of the Bill was hosted on the website of the Ministry of Finance on 28.9.2016. Stakeholder and public comments were invited upto 31.10.2016 setting during key

5) Since moving the Indian Financial Code (IFC), recommended by the FSLRC, in totality is a time consuming process, aspects of the IFC are fast-tracked as follows: key being

(ii) the aegis of the Financial Stability and Development Council (FSDC) that will be used for analysis of financial stability and related issues. Setting

(iii) The Government has set up a Public Debt Management Cell (PDMC), as an interim arrangement before setting up of a full-fledged independent and statutory debt management body; namely, Public Debt Management Agency (PDMA) of India, in due course separation of debt management functions from RBI to PDMA in a gradual and seamless manner; without market disruptions. PDMC shall be upgraded to a statutory PDMA in due course: The PDMC will have only advisory functions to avoid any conflict with the statutory functions of Reserve Bank of India (RBI). causing

(C) and (d): In pursuance to the recommendations of FSLRC regarding ensuring settlement finality by Payment   and   Settlement   Systems Act; 2007 was amended by (Amendment) 2015 to strengthen the provisions of the finality of settlement in the payment system: The Payment and Settlement Systems Act, 2007 now provides that where a court has declared a system participant &s insolvent, or is dissolved or wound Up, the settlement which is final and irrevocable would not be affected. Further; the right of the system provider to appropriate any collaterals contributed by the system participant towards its settlement etc. would also not be affected. This provision would override that of the Companies Act; 1956, Companies 2013 and the Banking Regulation Act; 1949. Further, the final settlement would not be affected even in cases where the court Or tribunal has appointed a liquidator. It is further clarified that this would apply to any settlement made prior to such order Or immediately thereafter. Act, Act,

In pursuance to the recommendations of Working Group on Banking of FSLRC to strengthen the recovery mechanism of banks and financial institutions, the Recovery of Debts due to Banks and Financial Institutions 1993 and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest 2002 have been amended through the Enforcement of Security Interest and Recovery of   Debts Laws and Miscellaneous   Provisions   (Amendment) Act; 2016. The amendments in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act; 2002 have been made to suit changing credit landscape and augment ease of business which, inter alia, include registration of creation, modification and satisfaction of security interest by all secured creditors and provision for integration of registration systems under difterent laws relating t0 property rights with the Central  Registry s0 as to create central database of security interest on specific timeline for possession of secured assets; and (iii) providing priority to secured creditors in repayment of debts The amendments in the Recovery of Debts due to Banks and Financial Institutions Act; 1993, inter   alia, include expeditious   adjudication of' recovery applications; (ii)  electronic of recovery applications, documents and written statements; (iii) providing priority to secured creditors in repayment of debts; (iv) empowering the Central Government to provide for uniform procedural rules for conduct of proceedings in the Debts Recovery Tribunals and Appellate Tribunals. Further; Government has also   modified the Debt Recovery Tribunal (Procedure) Rules and Debt  Recovery Appellate Tribunal (Procedure Rules notified vide notification dated 4th November, 2016. Act, Act; doing taking filing

In pursuance to the recommendation of the FSLRC regarding   creating a statutory and amended by a statutory and institutionalised   framework for a Monetary Committee; for maintaining price stability, while keeping in mind the objective of growth: The Monetary Policy Committee is entrusted with the task of the benchmark policy rate rate required to contain inflation within the specified target level. Rules and notification of commencement the relevant sections of the RBI Act; 1934 have been published in Official Gazette on 27.6.2016. Inflation Targets have also been finalised in consultation with RBI and published in Official Gazette on ,5.8.2016. The constitution of Monetary Committee has been notified in the Official Gazette on 29.9.2016 and is functional. Policy fixing (repo Policy