10-Aug-2017: Law Ministry approves revised Cabinet proposal on the creation of the Financial Data Management Centre (FDMC)

The Law Ministry has approved a revised Cabinet proposal on the creation of the Financial Data Management Centre (FDMC) that would subsequently collect raw data directly. FDMC will now collect data in electronic format from the (financial) regulators. Over time, it will gradually build capacity to collect data from the regulated entities i.e. Financial Service Providers. FDMC and the regulators can also “enter into agreement” for flow of data, “stringent confidentiality norms”. This ensures the same level of protection as provided by various acts applicable to the regulators and guarantees that the “data centre is at all times kept secure and effectively protected”. In order to facilitate FDMC functioning, “consequential amendments” have been sought in the RBI Act, Banking Regulation Act and the Payment and Settlement Systems Act as their confidentiality clauses do not allow access to raw data.

FDMC will be set up through an Act. Initially, FDMC was to be a non-statutory body to collect data from financial sector regulators, standardise and analyse them on issues relating to financial stability for onward decisions by the Financial Stability and Development Council (FSDC). It was also to provide regular access to the data. However, the Department of Legal Affairs turned down the initial Cabinet proposal saying that a non-statutory FMDC would find it difficult to acquire data from the regulators, majority of which were statutory.

Moreover, it said that any levy of penalty through a gazette notification for violation of data management scheme would neither be legally tenable nor withstand judicial scrutiny. Besides, courts may not take cognizance of any such offence and compounding of the same under the Code of Criminal Procedure is also not feasible.

The Reserve Bank of India (RBI) would now no longer be the sole collector and custodian of financial data. The RBI is also against sharing raw data that it gets from banks and other market sources with FDMC as it is not obliged to share confidential client information of banks with anybody. The only exception is when a law enforcement agency has to get specifics on an individual company for investigation purpose. But it has to then approach the courts first to get an order to request the data from the regulators.