tag:blogger.com,1999:blog-5043138489010794057.post7574528565058690819..comments2024-03-27T15:57:09.192+05:30Comments on Urbanomics: The concerns with India's proposed financial codeUrbanomicshttp://www.blogger.com/profile/16956198290294771298noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-5043138489010794057.post-70838351360377917262015-05-13T08:21:14.351+05:302015-05-13T08:21:14.351+05:30Pratik, thanks also for sending the link. will sur...Pratik, thanks also for sending the link. will surely read it soon. Urbanomicshttps://www.blogger.com/profile/16956198290294771298noreply@blogger.comtag:blogger.com,1999:blog-5043138489010794057.post-27936293290675116082015-05-13T08:19:12.759+05:302015-05-13T08:19:12.759+05:30Thanks Pratik for the comments. I'll post long...Thanks Pratik for the comments. I'll post longer clarifying on these issues one of these days. <br /><br />I have multiple concerns on the rules/principles issue. But the primary issue is that I see no compelling argument for a paradigm shift, especially when there is nothing about the principles based legislation that makes it superior to rules based one and the latter any inferior. I have not come across any credible and widely accepted (across all shades of view) study/paper/opinion on the relative benefits of the contrasting UK/US models in financial regulation. <br /><br />As to the judicial review, it is all well to argue across the table and enshrine in a statute that only reviews and not appeals will be allowed. Mission creep is inevitable with our judiciary (actually is true of all our institutions)... leave aside the several judgments that have been pronounced on union government policies, the judgments of the appellate tribunal on SEBI and IRDA decisions are ample proof of this inevitability...<br /><br />Both this and the earlier point about rules/principles based regulation therefore may also have to be seen in light of the maturity of our democratic institutions ... <br /><br />Finally, of course, there are so many good things about the Code and either ways it would count as one of the landmark events in the history of Indian financial markets. In any case, my argument on each of these points does not deny that its supporters have a case (sometimes compelling) to argue for, but just that their costs outweigh (in some cases, far outweigh) their benefits. <br /><br />Amol, great to hear from you and thanks for the comments. I agree with you and there are many more other areas where he has flipped his stance for no good reason other than that he is more informed about the issue or has a vested interest of an insider. Urbanomicshttps://www.blogger.com/profile/16956198290294771298noreply@blogger.comtag:blogger.com,1999:blog-5043138489010794057.post-33439148569227276592015-05-12T08:13:38.057+05:302015-05-12T08:13:38.057+05:30I am not sure with this Gulzar. The current Govern...I am not sure with this Gulzar. The current Governor himself was party to FSLRC report. <br /><br />All these limitations of financial sector have been exposed after the crisis but continue to be appreciated and recommended. <br /><br />The report caused much a headache for previous Governor and he made a case against the report as well. But was royally ignored. Just because we have a celebrity making the same statements does not make the issue a new one. <br /><br />So you continue to believe in these ideas as an academic but not as a policymaker. You make an inroad from an academic to a policymaker based on so called new global ideas. Then very conveniently you throw them out on becoming a policymaker as you see your powers shrinking. <br /><br />Talk of double standards in Indian monetary policy at the moment. It is all over the place..Amol Agrawalnoreply@blogger.comtag:blogger.com,1999:blog-5043138489010794057.post-80539250480694518642015-05-11T22:38:28.841+05:302015-05-11T22:38:28.841+05:30I will try to respond to some of the main issues y...I will try to respond to some of the main issues you raise regarding the FSLRC proposals from a lawyer's perspective: <br /><br />1. FSLRC recommended that the primary law (enacted by the Parliament) should be principle based. Subordinate legislations (like regulations made by regulators) need not necessarily be principle based - they can be detailed rules too. See p. 13 (last paragraph). If you read the current Indian laws, a lot of gritty details are mentioned in the primary statute - this is unnecessary. Compare this with FSMA is UK. You will see the difference for yourself. <br /><br />Judicial review of RBI's regulatory actions has been recommended by a number of previous expert Committees. FSLRC merely reiterated the stand. For example, see p. 133 of the Raghuram Rajan Committee Report (A hundred small steps - 2009). Do note, there was no dissent note in this report. <br /><br />2. It is a well-settled position under Indian law, as developed by the Supreme Court, that policy decisions are not within the remit of judicial review (public interest litigation by SC/HCs under writ jurisdiction being an exception). Therefore, any Indian lawyer would easily understand that the IFC does not prescribe judicial review of policy decisions by a Tribunal. If you get time, please do read my blog post on this point: <br />http://ajayshahblog.blogspot.in/2014/06/the-curious-case-of-mca-live-example.html<br /><br />Your example on this point is incorrect. The substantive merit of the ban cannot be challenged under IFC. However, the ban must be by regulations. If the process for regulation making under IFC is not followed, then only can the regulation be struck down by the Tribunal. Therefore, the Tribunal does not second guess policy decision - it is just a process watch-dog.<br /><br />As of today, a basic function like regulation making itself is quite haphazard in India. A maze of legal instruments like regulations, circular, guidelines, schemes etc are issued without any basic clarity as to the legal difference among these instruments. This process needs to be made more uniform and rigorous for obvious reasons. FSLRC seeks to achieve this goal. <br /><br />3. On the merging of the regulators, let me pose a question: Why is ULIP not a security but an insurance contract? Once you start pondering over these kind of issues, you will see that these differences are mostly not based on economics but on historical legacy - which I prefer calling `legal inertia'. It is much better to have one regulator overseeing market conduct for all financial contracts and prevent any of them falling out through the jurisdictional gap between two or more regulators. This would prevent repetition of a ULIP kind of story. <br /><br />Disclosure: I was involved in the FSLRC work. However, I hope you will find my reasoning logical and unbiased. <br />Pratik Dattanoreply@blogger.com