May 05, 2008
Abstract: In the second of the two-part commentary on the draft report of the Committee on Financial Sector Reforms (CFSR) published in 2008, the focus is on proposals for urgently required reforms relating to (a) market development, (b) credit infrastructure, and (c) a new regulatory architecture.
A significant proposal relating to market development is to open up government and corporate debt markets to foreigners, a move consistent with the recommended transition to a market-based exchange rate regime. In contrast, the proposal to revoke existing bans on certain markets may require further debate. As regards credit infrastructure, a universal smartcard identification system has been recommended, which would facilitate access to formal credit mechanisms as well as improve delivery of public services. Finally, the report lays a strong foundation for a universal regulatory agency which inter alia would help derive the full efficiency gains from universal banking while managing the risks.
Keywords: Committee on Financial Sector Reforms (CFSR); market development; credit infrastructure; regulatory architecture; risk management; agricultural commodity futures; universal regulator; systemic risk; Abhijit Sen Committee