The sector should also adopt voluntary codes for corporate governance. This is necessary for regulation to be growth-oriented and effective. The need is for a change in mindset -- both on part of government and corporates -- bringing it in line with existing business environment, said CII. According to CII, there are two fundamental barriers to good corporate governance in the financial sector poor bankruptcy procedures, which prevent takeovers and restructuring of under-performing companies, and over-regulation of debt, which leads to greater risk for financial institutions and banks.

In terms of bankruptcy law reform, CII strongly recommends the SICA Bill 1998 must be adopted as soon as possible.This would lead to early detection of bankruptcy (debt default as opposed to erosion of net worth), voluntary bankruptcy restructuring, and a time-bound, transparent approach. The second problem could be greatly alleviated if a culture of transparent disclosures take root. Regulatory authorities need to change focus to quality of disclosure, and stop emphasising on quantity.

On single regulatory framework for financial sector, CII said authorities' emphasis should be on promoting coordination between regulatory bodies.