Draft Report of the High Level Group on Services Sector

Creation of International Financial Centre

The Group broadly endorses the findings of the High Powered Expert Committee (HPEC) on making Mumbai an international financial centre and recommends that the policy measures highlighted in that report be implemented.

A new approach to the financial sector

There are restrictions on undertaking complementary activities and on sharing information and infrastructure. In the context of the evolution of the financial sector, there is a need to examine whether this is the optimal structure for the future growth of the sector. Going forward, it would be appropriate to consider a holistic rather than a segmented approach towards the financial sector. This would involve the following key steps:

1. 
   Enabling the formation of financial services holding companies;
   
2. 
   Elimination of anomalous differences in the ownership regulations for various segments of the financial sector, with a bias towards freeing up ownership restrictions to the greatest possible extent;
   
3. 
   Sharing of distribution and “back-end” infrastructure, including a review of the current prohibition against assigning asset management activity by insurers to asset managers, among financial service providers; and
   
4. 
   Move towards a single regulator for financial services, as opposed to the current multiplicity of regulators for different segments.
   

There is a need now for rapidly embracing innovation in order to meet the needs of various customer segments and achieving global competitiveness. There is therefore a need to consider a shift from a “rules-based” regulatory framework that is prescriptive and focused on controlling the financial sector, to a “principles-based” approach that encourages innovation and growth, within an overall framework of financial stability.