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Policy Issues1
Policy Issues1
Mandlik
comprehensive registration nor an apex body of regulation of the securities market. Stock exchanges were run as brokers clubs as their management was largely composed of brokers. No prohibition on insider trading, or fraudulent and unfair trade practices.
Still there is an absence of meaningful price discovery or liquidity in markets other than the equity market.
Policy Issues
There are mainly six areas for financial sector reform where there is broad consensus
Mistakes in regulation of institutional investors Flawed regulatory architecture Flawed legal framework
Regulatory Architecture
India has an alphabet soup of regulatory agencies dealing with finance like: Reserve Bank of India, RBI Securities and Exchange Board of India, SEBI Insurance Regulatory and Development Agency, IRDA Pension Fund Regulatory and Development Agency, PFRDA Employees Provident Fund Organization, EPFO Forward Markets Commission, FMC Department of Company Affairs, DCA
Legal Framework
The drafting of law is supposed to be flexible and the courts refine the
interpretation of law under changing circumstances. A transformation of the regulatory architecture will undoubtedly require legislative activism: to place all organized financial trading at SEBI and to create a new independent banking regulator. This drafting needs to be accompanied by a shift of both banking and securities law toward broad principles, a removal of various bans, and the elimination of resource pre-emption by the government.
Financial Firms
Indian financial firms have to compete by becoming multi-product
Tax Distortions
The excess burden of taxation, also known as the distortionary cost or
deadweight loss of taxation, is the economic loss that society suffers as the result of a tax, over and above the revenue it collects. Eg. Securities transaction tax, Difficulties of taxation of corporations etc
firms at Singapore or Dubai could compete with trading in India. The trading in international commodity derivativessuch as gold or crude oilthat takes place onshore will come under severe competitive pressure from global derivatives exchanges once capital controls are removed.