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Financial
Sector 39. A mature and well functioning financial system is essential for promoting savings, channelling investment into the most productive activities and ensuring an efficient payments mechanism. The East Asian financial crisis has highlighted the importance of prompt action to strengthen our financial system. The recently submitted Narasimham Committee Report has provided many recommendations which are being examined in consultation with RBI. However, I am happy to announce that decisions have been taken on some important recommendations.
40. Non-Bank Finance Companies (NBFCs) perform an important role in our financial sector. But regulation of this sector has to improve to protect unwary small investors. The Reserve Bank of India Act was amended last year with a view to laying down a framework for improved regulation of NBFCs. RBI has recently issued guidelines for registration as also for effective regulation of NBFCs. Our objective will be to develop a framework of prudential regulations and a supervisory system which will foster the development of a healthy financial system and also provide transparent disclosure norms leading to greater depositor awareness to enable the investors to take well informed investment decisions. 41. Along with reform of the banking sector, it is necessary to move forward with reforms in insurance which has hitherto been a public sector monopoly. In order to provide better insurance coverage to our citizens and also to augment the flow of long-term resources for financing infrastructure, I propose to open the insurance sector to competition from private Indian companies. The Insurance Regulatory Authority will also be converted into a statutory body. Necessary legislation will be introduced later in the year. |
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