Macro/Finance Group, NIPFP

India's financial landscape has changed dramatically over the last decade. While India's financial needs are growing, the current regulatory arrangements inhibit growth. This paper discusses the limitations of the present financial regulatory system. The evolving discourse on financial regulatory reforms recognises that the motivation for state intervention in finance must be guided by an understanding of the sources of market failure. This paper summarises the sources of market failure and identifies areas of state intervention in finance. Drawing on this approach, the Government backed Financial Sector Legislative Reforms Commission (FSLRC) prepared a single unified law- the Indian Financial Code (IFC) that seeks to modernise the Indian financial system by transforming the laws, the regulatory architecture and the working of the regulators. This paper discusses the components of the draft Indian Financial Code and describes the state of progress in implementing the IFC framework.