The Centre has decided to formalise the transformation of the high-level committee on capital markets into a quasi-regulator to over see all aspects of the financial sector, despite the reservations of the finance ministry on the same.

Officials said the only remaining obstacles in the transformation of the committee from a policy forum to a hands on role to determine the course of the capital markets was whether the finance ministry or the Reserve Bank of India should take on the role as the secretariat of the new body.

The high-level committee on capital markets is the apex body in the country that resolves all capital markets issues which fall between the turf of Securities and Exchange Board of India, the finance ministry and the RBI.

It is chaired by the governor of the apex bank and includes the finance secretary, the chairman of Sebi and IRDA.

The issue was discussed in the recent meeting of the committee over the weekend.

Sources said the finance ministry while agreeing to broadbase the role of the high-level committee on capital markets into that of a quasi-regulator had held that this would make the government more deeply involved in the developments in the financial sector.

Accordingly for any untoward event in the financial world, the finance ministry would be involved right from the word go, which could restrict the policy options with the Centre to resolve the tangle.

But it has agreed that the experience of the stock scam of 2001 and the subsequent the Unit Trust of India fallout had left the policy makers with little choice.

The Centre was also under pressure to decide on the issue as it had to submit its action taken report on the recommendation of the joint parliamentary committee on the stock scam by next month.

The JPC had asked for the formation of a super regulator to keep a better surveillance on especially the stock markets.

The sources added that the decision does not mean the high-level committee on capital markets would become a super regulator. Instead it would become a more hands on body with regular feedbacks from the other regulators. It would however not interfere in the functioning of these regulators.

While the United Kingdom does have an omnibus Financial Services Authority, the ministry had so far held that the existence of four regulators including the yet to be formed Pension Regulatory Development Authority in India would not necessarily create regulatory loopholes.

However, Finance Minister Jaswant Singh has also said that he is keen to block all regulatory gaps.

It came into existence after the 1992 stock market scam to fill the policy level gap between the different market regulators.