Needed, a Fi­nan­cial Re­dres­sal Agency

The Economic Times - - The Edit Page -

Fixed de­posits in banks and ad­min­is­tered sav­ings schemes such as the Pub­lic Prov­i­dent Fund (PPF) are los­ing their sheen, mak­ing the case for peo­ple to switch to other sav­ings op­tions com­pelling. How­ever, gaps in fi­nan­cial reg­u­la­tion leave or­di­nary savers, who lack fi­nan­cial lit­er­acy for the most part, vul­ner­a­ble to mis-sell­ing. Rightly, the Fi­nan­cial Sec­tor Leg­isla­tive Re­forms Com­mis­sion had posited con­sumer pro­tec­tion as the rai­son d'être of fi­nan­cial reg­u­la­tion and rec­om­mended a uni­fied reg­u­la­tory agency to en­force the con­sumer pro­tec­tion law. Hav­ing ac­cepted its rec­om­men­da­tion in the 2015-16 Bud­get, the gov­ern­ment should swiftly set up a fi­nan­cial re­dres­sal agency (FRA) with le­gal back­ing to ad­dress griev­ances.

Rightly, a task force on the FRA has rec­om­mended em­pow­er­ing the agency to pro­vide re­dress, given that reg­u­la­tors can­not be ex­pected to re­solve in­di­vid­ual com­plaints. Its sug­ges­tion to offer a sim­pli­fied res­o­lu­tion process through me­di­a­tion and light touch ad­ju­di­ca­tion when par­ties are un­able to reach a set­tle­ment makes sense. A per­for­mance re­view of the FRA will not suf­fice. The agency should be made ac­count­able to Par­lia­ment. Surely, reg­u­la­tors must also in­vest in im­prov­ing fi­nan­cial lit­er­acy to en­able peo­ple take in­formed in­vest­ment de­ci­sions — be it in stocks, mu­tual funds or in­sur­ance — be­fore push­ing di­rect sales or com­pletely switch­ing to a fee-based model. Coun­tries such as the US strength­ened con­sumer pro­tec­tion in fi­nan­cial prod­ucts and ser­vices af­ter the fi­nan­cial cri­sis. Re­port­edly, the Con­sumer Fi­nan­cial Pro­tec­tion Bu­reau (CFPB) set up in 2010 has re­turned nearly $12 bil­lion to 27 mil­lion con­sumers who were conned by fi­nan­cial ser­vices firms en­gag­ing in il­le­gal prac­tices. In­dia direly needs a ro­bust FRA to look out for or­di­nary con­sumers.

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