Millennium Post

FSLRC proposal to merge market regulators ‘schizophrenic’: Rajan

Reserve Bank of India Governor Raghuram Rajan on Tuesday trashed the much talked about Financial Sector Legislative Reforms Commission (FSLRC) and described one set of its recommendations as ‘somewhat schizophrenic’.

Saying that he wanted to debate parts of the FSLRC report, Rajan said there are two issues — the oversight of regulators and their size and scope.

‘The second area of tension is the appropriate size and scope of regulators. The FSLRC's recommendations seem somewhat schizophrenic here,’ he said.

‘On the one hand, it emphasises synergies in bringing together some regulators into one entity. But in the process it suggests breaking up other regulators, with attendant loss of synergies,’ Rajan said at the State Bank of India's Banking and Economic Conclave' here. The Governor also said the FSLRC suggests laws that do not micromanage, giving regulators the freedom to fill in the details in consonance with the changing needs of the economy.

‘At the same time, the FSLRC wants to check and balance the activities of regulators through judicial oversight. Too much of checks and balances could completely vitiate the flexibility afforded by rewriting laws,’ he said.

The FSLRC was set up in March 2011 to review and rewrite the legal institutional framework of financial sector laws. The commission headed by retired Supreme Court judge B N Srikrishna suggested, among other things, setting up a super regulator by merging the oversight functions of the market, commodity, insurance and pension regulators, while leaving the banking business under the RBI.

Rajan, however, said: ‘There is no discussion of the empirical magnitude of the synergies gained or synergies lost, which makes the recommendations seem faddish and impressionistic rather than based on deep analysis.’

‘It proposes all regulation of trading should move under one roof, all regulation of consumer protection should move under another roof, but the regulation of credit should be balkanised and  banks should continue to be regulated by the RBI but the regulation of the quasi-bank NBFCs should move to the Unified Financial Agency, a regulatory behemoth that would combine supervision of trading as well as credit,’ he said. This balkanisation, Rajan said, would hamper regulatory uniformity, supervision of credit growth and the conduct of monetary policy.

Govt slaps $300/tonne onion MEP to check domestic prices

New Delhi: Concerned over rising onion rates, the government on Tuesday imposed a minimum export price (MEP) of $300 per tonne on the kitchen staple to curb overseas sales and check retail prices.

Onion prices have risen to about Rs 25-30 per kg in the national capital from Rs 15-20 per kg a fortnight ago.

The MEP, which is the rate below which no exports are allowed, has been re-introduced barely three months after the previous government in March had abolished it.
‘The Commerce Ministry has imposed a minimum export price (MEP) of $300 per tonne on onions to curb exports,’ Consumer Affairs Secretary Keshav Desiraju said after a meeting on 'measures taken to tackle food inflation' at PMO.

Rising prices of essential food items like vegetables, fruits and cereals, pushed up wholesale price index based inflation to five-month high of 6.01 per cent in May.
Stating that country exports on an average 15 lakh tonnes of onions a year, he said: ‘The MEP is expected to have some impact on increasing domestic supply and check rising prices’.
Desiraju said the Consumer Affairs department, which monitors both retail and wholesale prices of food items, has flagged concern about price rise in onion to concerned departments and suggested urgent measures to check prices.

‘Price rise in onion is not alarming now but we have to be careful and the government is alert,’ he said. The Centre had imposed MEP on onion in September 2013 and then it was raised several times to curb exports as retail prices had shot up as high as Rs 100 per kg in major parts of the country. The country had to even import onion.

India produces around 17-18 million tonnes of onion a year. During last fiscal, India exported 13.58 lakh tonnes of onion against 18.22 lakh tonnes in the previous year.

Hope proper food management will soften prices: RBI

The Reserve Bank of India (RBI) on Tuesday said it is closely watching the inflation situation and hoped that proper food management will help in easing
of food prices. ‘We are watching inflation situation. Food prices have had an effect in the last couple of months,’ RBI governor Raghuram Rajan said, adding food prices may come down with appropriate food management by the government.
Headline inflation accelerated to five-month high of 6.01 per cent in May from 5.2 per cent previous month, mainly driven by high food and fuel inflation. ‘But, both the government and the Reserve Bank of India are watching and have to be vigilant in this,’ he said while talking to reporters on the sidelines of a State Bank of India (SBI) event here. On the ongoing Iraq crisis, which has impacted global crude oil prices and also affected the rupee, Rajan said this
is an area of concern.

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