Chennai: Finance Minister P Chidambaram on Monday slammed "unregulated" players in the financial market saying their activities have adversely impacted large number of consumers.
The financial sector operates in a speed and dynamism, and generates new space, sometimes "undefined" areas, which provide opportunities for "unregulated" players in the market, he said at a seminar here.
"The existence of such (unregulated) players who operate in the twilight zone endanger the discipline of the markets leading to systemic instability. Invariably, such activities adversely impact a large number of consumers. This reduces their confidence in the system.", Chidambaram said.
He was speaking at the National seminar on "Indian Financial Code" recommended by the Financial Sector Legislative Reforms Commission, organised by the Institute of Company Secretaries of India, here.
Observing that large number of investors, particularly smaller investors, stay away from the (financial) system he said, "it reduces the supply of blood to the body economic. A financial consumer is comfortable to participate in a regulated market."
However, exploiting the limitations of the regulatory architecture, "financial" engineers come up with innovative products outside the regulatory jurisdiction and "deprive" the consumers of such products of regulatory protection, he said.
"We believe that we must move quickly to remove all unregulated space. A recent attempt in this direction is the Ordinance that I referred to, which was first promulgated in July 18 this year and repromulgated in September 16, which considers any raising of resources by whatever means, if not regulated otherwise as a collective investment scheme", he said.
"Our endeavour is to eliminate unregulated space.", he said adding Indian government was focused on protection of financial consumers.
Noting that India has implemented many reforms in the past in the financial sector, Chidambaram said, "we have travelled at a reasonable speed in financial sector reforms since the early 90s. But, the speed is not good enough as financial developments unfold thick and fast".
Admitting that India was responding to crisis rather than anticipating them, he said shifting of regulation of the commodities futures market to the Ministry of Finance was a response to a crisis and "did not anticipate the crisis".
"In a changing world, Financial Economic Policy has to catch up with the needs of future India that we are aspiring to build", he said.
Recalling that during the last few decades India witnessed several new legislative initiatives including the SEBI Act, IRDA Act and various amendments to financial sector, he said, "the next wave of reforms will be through strengthening our institutional foundation both laws and organisations, and by taking well designed policy decisions which will enhance clarity, consistency and transparency for a globalised India".
Stating that the Government has already initiated steps, to improve the regulatory governance process and have initiated discussion on the non-legislative steps recommended by the Financial Sector Legislative Reforms Commission(FSLRC), he said, "The legislative parts will be pursued after due consultations."
"We will set up various project management groups for charting, synchronising and sequencing the actions required in implementing the big institutional changes.", he said.
He assured the Financial Sector Policy will be in tune with the aspirations of India and will promote clarity, consistency, competition and transparency and protect the autonomy of the institutions.
"It will be difficult for me to spell out the details of the policy at this stage. Because policies are taken based on emerging requirements", he said.
First Published: Monday, September 30, 2013, 14:55