Here’s FM Nirmala Sitharaman’s trinity to take financial markets ahead

Union Finance Minister Nirmala Sitharaman has proposed a road map for India’s financial markets and especially its regulators as the country increasingly competes on a global level to attract capital. 

The finance minister believes that India is competing not only with the emerging economies but also with the developed ones to attract capital and hence aspects like public consultation in making regulations, regulatory impact assessment and, most importantly, balancing the trinity of “creation, maintenance and sustenance” is of paramount importance. 

“Taking into account our national priorities, I would propose that the regulatory environment must try to balance at all times the creation of conducive environment for starting and running businesses; the maintenance of market integrity and the sustenance of market stability,” she said late last week at an event in Mumbai, while launching the AMC Repo Clearing Ltd. (ARCL) and the Corporate Debt Market Development Fund (CDMDF). 

“I think this can be the possible trinity with which we can take the financial domain, markets, regulators, government and the policy makers and the legislatures all to look forward for a robust market system that will take us forward to a developed India,” she added. 

Interestingly, the finance minister also highlighted the fact that Indian regulators have been proactive in withdrawing various obsolete regulations and notifications though she added that such reviews should be comprehensive in nature and should become an integral and permanent part of regulatory life cycle. 

The minister further said that the time limits for deciding on applications under various regulations should also be laid down in the interests of ease of doing business and for being responsive.  

On a different note, she said that the government may also look at an impact assessment analysis to ascertain the effect of any regulation. 

“We may also have a regulatory impact assessment to continuously assess the positive and negative effects of proposed and existing regulations and non-regulatory alternatives. It is an important element of evidence-based policy making and I feel this can enhance accountability and transparency in the policy-making and decision-making processes,’ said the minister. 

“All financial sector regulators must consider regulations proportionate to risks and factor in risk mitigating by using tech-enabled systems by regulated entities,” she said. 

“So, there is a new area of work, which may not be new for many of the stakeholders but for regulators, that area of work should now take priority in order to be able to be a facilitating regulator and that is very critical for today’s environment. Therefore, the quality, proportionality and effectiveness of regulations matter the most for ease of doing business, ease of investing and ease of living,” she added.