World Bank, IMF and USOTA to assisit India to set up non legislative financial bodies

The government has decided to rope in international bodies for seeking assistance for the establishment of three different entities - Public Debt office, Resolution Corporation and Financial Data Management Centre.
 
 These are three among the four task forces to be set up as envisaged under the recommendation of the Financial Sector Legislative Reforms Commission.
 
 The ministry of finance is in process of signing an agreement with the World Bank for setting up Public Debt Office. According to officials, World Bank has expertise in handling debt management functions which will come handy for India to separate the debt management function from the overall activities of the Reserve Bank of India and run it like a separate office.

 

Similarly, it proposes to tie up with the International Monetary Fund (IMF) for establishing Financial Data Management Centre. The Financial Stability Development Council, an arm of the finance ministry will run this "financial data management centre", a database on the financial system.

This will be similar to what is being done in Canada (by their central bank) and the US (by a Treasury agency). This comprehensive data does not exist in a single place, said official sources . The primary objective of this centre will be to detect sources of systemic risk.
 
 In another similar development , the ministry proposes to seek the assistance of United States Department of Treasury – Office of Technical Assistance ( OTA) to set up the Resolution Corporation. As per the recommendation of FSLRC, 'Resolution Corporation' would watch all financial firms which have made intense promises to households, and intervene when the net worth of the firm is near zero (but not yet negative).

It would force the closure or sale of the financial firm, and protect small consumers either by transferring them to a solvent firm or by paying them. In the case of banks, the deposit insurance program (where all households are guaranteed up to Rs. 100,000 of their bank deposits) would be operated by the resolution corporation.
 
This body of OTA, on the other hand hand provides comprehensive financial advice around the world by directly working with foreign governments to support their efforts to improve their financial systems. Core areas of assistance provided by this office include budget policy and management, financial institutions policy and management, financial enforcement and tax policy and administration.

 
The Ministry of Finance (MoF) and the Financial Sector Regulators have decided to adopt the governance enhancing principles of the non-legislative recommendations of FSLRC. These three task forces are the priority.
 
The fourth establishment financial sector appellate tribunal envisaged by FSLRC is on hold for the time being as it is contingent upon a unified regulatory structure. This is because this body was to be formed subsuming the existing Securities Appellate Tribunal (SAT), to hear all appeals in finance. According to official sources, this would require major legislative changes which is the not the agenda right now.