New Delhi: Differing with recommendations of the Finance Sector Legislative Reforms Commission (FSLRC), four members in their separate dissent notes have expressed their opposition to dilution of the powers of the RBI.
The experts wanted the Reserve Bank to be the sole regulator of inward and outward flows of foreign exchange. They also were of the opinion that the central bank should continue to regulate the non-banking finance companies (NBFC).
These opinions were expressed by four FSLRC members -- K J Udeshi, Y H Malegam, Jayanth Varma and P J Nayak -- in their dissent notes, which was attached with the report presented by Commission Chairman B N Srikrishna to the Finance Minister last week.
The 10 member Commission had suggested that the government should regulate inward inflows of foreign funds, while the role of RBI should be limited to regulating outward flows.
It also suggested that the role of RBI should be restricted to regulating banks and NBFCs should come under the ambit of the proposed Unified Financial Agency (UFA).
Former RBI Deputy Governor Udeshi said: "It is imperative that the policy on exchange rate management should remain with the RBI."
Malegam, a nominated member on the RBI board, said: "Rules should be made by the government only in respect of FDI inward flows and rules in respect of all other flows, both inward and outward should be made by RBI.
"... The distinction made in the Report between inward and outward flows is not as relevant as a distinction between inward FDI flows and other inward flows."
With regard to regulation of NBFCs, Malegam said "it is essential that NBFCs and HFCs should be regulated by the same regulator as regulates the banks, i.E. RBI.
Similar opinions were also expressed by Nayak and Varma.