Macro/Finance Group, NIPFP

Fundamental Redesign of Financial Law: The Indian Approach

Fundamental Redesign of Financial Law: The Indian Approach, Ila Patnaik, Ajay Shah. India Review, Volume 14, Issue 1, Pages 91-110, March 2015.

India is at the cusp of important financial sector regulatory reform. The reform aims at deeper changes in financial sector laws and regulatory architecture. While many incremental reforms were undertaken in the last two decades, the pace of change has slowed down owing to the constraints posed by the underlying legal framework. The key problems in the financial sector include: lack of financial inclusion, a glacial pace of innovation, the growth of an unregulated shadow financial system, numerous ponzi schemes, high inflation, and barriers to capital flows. In the last decade, there have been many efforts in rethinking financial sector regulation to address these problems. A group of expert committees created a consensus around a strategy for change, which has led to a draft law proposed by the Financial Sector Legislative Reforms Commission set up by the Ministry of Finance of the Government of India.