MUMBAI: The Union Budget proposes to take away regulatory power of the Reserve Bank of India (RBI) over secondary market trading in government securities and move it to the Securities and Exchange Board of India (Sebi). This is in addition to ending RBI's role as the government's merchant banker by creating a Public Debt Management Agency.
Tucked in the Financial Bill is a clause that seeks to amend Clause 45U and 45W of the Reserve Bank of India Act. This section defines RBI powers in the financial markets. These measures and other proposals such as amendment to Foreign Exchange Management Act to shift regulation-making power on equity-related capital flows to the government, moving government debt management to a Public Debt Management Agency and the move to implement recommendations of the Financial Sector Legislative Reforms Commission (FSLRC) headed by Justice Srikrishna leaves the RBI with a much smaller turf.
Most of the moves in the budget have been the subject of debate for many years. For instance, past committees had suggested Sebi overseeing secondary market trading in government bonds since it was the financial regulator. The shift of management of public debt to the government was many years back made by RBI itself on the grounds that there was a conflict of interest as RBI as the merchant banker would always seek to keep yields on G-secs low. The inclusion of several of these items in the budget seems to indicate that the government has taken a swift decisive decision on financial regulation.
Tucked in the Financial Bill is a clause that seeks to amend Clause 45U and 45W of the Reserve Bank of India Act. This section defines RBI powers in the financial markets. These measures and other proposals such as amendment to Foreign Exchange Management Act to shift regulation-making power on equity-related capital flows to the government, moving government debt management to a Public Debt Management Agency and the move to implement recommendations of the Financial Sector Legislative Reforms Commission (FSLRC) headed by Justice Srikrishna leaves the RBI with a much smaller turf.
Most of the moves in the budget have been the subject of debate for many years. For instance, past committees had suggested Sebi overseeing secondary market trading in government bonds since it was the financial regulator. The shift of management of public debt to the government was many years back made by RBI itself on the grounds that there was a conflict of interest as RBI as the merchant banker would always seek to keep yields on G-secs low. The inclusion of several of these items in the budget seems to indicate that the government has taken a swift decisive decision on financial regulation.
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