Indian Financial Code (IFC) and Monetary Policy Committee (MPC):
Formation and Purpose:
The Financial Sector Legislative Reforms Commission (FSLRC) was constituted in 2011 under the chairmanship of Justice (Retd.) B. N. Srikrishna. The primary objective of the commission was to comprehensively review and modernize the legal and institutional framework of the financial sector in India.
Key Recommendations - Indian Financial Code (IFC):
- Comprehensive Overhaul:
- The FSLRC recommended the creation of the Indian Financial Code (IFC) to replace a substantial portion of existing financial laws. The IFC aimed at simplifying and modernizing the regulatory and legal framework governing the financial sector.
- Monetary Policy Committee (MPC):
- Similar to the recommendations of the Urjit Patel Committee, the FSLRC proposed the establishment of a Monetary Policy Committee (MPC). The MPC would be responsible for making decisions related to key monetary policy parameters.
- The MPC's decision-making process would involve a majority vote, ensuring a collective and diversified approach to setting monetary policy.
- Public Debt Management:
- The IFC also suggested changes in the management of public debt. This included reforms in the way government borrowing is conducted and how public debt is managed to ensure efficiency and transparency.
Significance:
The recommendations of the Financial Sector Legislative Reforms Commission, particularly the proposal for the Indian Financial Code and the establishment of a Monetary Policy Committee, were aimed at bringing about significant reforms in the financial sector's legal and institutional structures.
While not all recommendations of the FSLRC were immediately implemented, the idea of an MPC gained traction and eventually found its way into the broader reforms of India's monetary policy framework. The establishment of the MPC has become a key feature of India's monetary policy governance, contributing to transparency and a more systematic decision-making process.
