09 March 2009

Financial sector reforms - IBA

Two days back I was at a well attended International Bar Association conference on business law held in Mumbai. On a panel that I was on, about financial reforms, I gave my usual more-negative-than-thou theory to all the panelists who spoke about we'll-be-ok-in-two-quarters spiel. I made three short points of reforms in this era. First, we should have a single regulator for the financial sector as recommended by the Mumbai as an International Financial Centre committee report - covering securities, banking, insurance, pension and government securities. Such a bold and correct step reducing regulatory arbitrage would never be possible except in times of crisis. It would be a tragedy to waste the crisis for such reforms. Second, with a need to give a fillip to and to create the fiscal incentives on infrastraucture spending and in light of the need of a Public-Private partnership, it is key to move forward rapidly on creating a vibrant corporate debt market. We can't afford otherwise. Third, in light of the Satyam scandal, there is a need to immediately introduce a vastly superior system of corporate disclosures (a blueprint of which has been readied after three years of work on the subject). It would be tragic if this is not immediately implemented and confidence in India Inc suffers because of poor disclosures.

PS: I have posted about the third point previously (integrated disclosures) and hope to write about the specifics of reforms needed in the corporate debt market.

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