The Reserve Bank will soon rope in other regulators Securities and Exchange Board of India and Insurance Regulatory and Development Authority to set up a working group in a bid to strengthen the regulatory mechanism for preventing the potential "conflict of interest" in the financial sector.
The group, which would be asked to submit a report within four months, is mainly aimed at evolving methods to safeguard the interests of investors and stakeholders.
Announcing the move in its busy season Credit and Monetary Policy, RBI Governor Y V Reddy said the group would identify the sources and nature of "potential conflict of interest" and international practices to mitigate any problem.
The group, to be set up in consultation with chairmen of SEBI and IRDA, would also study the existing mechanism in the country and make recommendations to avoid any conflict.
This is intended to have a "positive impact on investor confidence, efficacy of regulatory framework and above all the credibility of all associated with financial services," Reddy said.
There is increasing concern internationally over the impact of "conflict of interest" in the financial sector, the RBI Governor said.
Legislative and regulatory measures have been adopted by different countries to ensure such conflicts did not allow compromise of interests of stakeholders and the public at large, Reddy added.