August 4, 2015 – The revised draft of the Indian Financial Code (IFC), which was released on July 23rd, 2015, proposes to dilute the Reserve Bank of India (RBI) Governor’s power, particularly his ability to veto policy rates.

According to one source, the Financial Sector Legislative Reforms Commission (FSLRC), created in March of 2011, re-wrote the IFC to regulate the financial sector and introduce principles for financial regulation and the constitution, objectives, powers and interaction of financial agencies. Its aim was also to bring about coherence and efficacy in the financial regulatory framework.

The Code deals with the establishment of financial agencies, establishment and structure of the tribunal, allocation and regulation of financial services. A part of it discusses the functioning of financial agencies, such as boards of financial agencies, strength and composition of boards; decision making, advisory councils, accountability mechanisms and funding for financial agencies.

However, in early August, the Modi government disowned the proposals in the draft IFC, stating that the people of India “own the draft, not the Government or the FSLRC.” It was claimed that the Code seeks to dilute the Reserve Bank’s powers to regulate the foreign exchange and government bond markets in addition to setting monetary policy, to the detriment of Indian financial markets.

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ET Bureau. “The Indian Financial Code: What’s promising, what’s not.” The Economic Times. The Times of India, 29 July 2015. Web. 4 August 2015.