Recently, the 26th meeting of Financial Stability and Development Council (FSDC) was chaired by the Union Finance Minister.
During the meeting, FM emphasised the importance of continuous risk monitoring in the financial sector so that necessary action can be taken to mitigate any vulnerability on time. The FM also reviewed financial sector issues that can be taken up during India’s G20 Presidency in 2023.
Deliberations at the meeting –
- The meeting takes place at a time when key central banks are aggressively raising interest rates to contain runaway inflation, and the conflict in Ukraine continues to threaten both inflation and growth forecasts.
- According to an official statement issued following the meeting, the FSDC discussed early-warning indicators for the economy and readiness to deal with them.
- It was noted that the Government and regulators must continuously monitor financial sector risks, financial conditions, and market developments so that appropriate and timely action can be taken to mitigate any vulnerability and strengthen financial stability.
- It also discussed improving the efficiency of existing financial and credit information systems, governance and management issues in systemically important financial institutions, strengthening the financial sector’s cyber security framework, and so on.
- At the same time, the meeting discussed issues such as power sector financing, the strategic role of the GIFT international financial services centre and inter-regulatory cooperation.
What is Financial Stability and Development Council?
- FSDC is a non-statutory apex council under Ministry of Finance constituted by Executive Order of Union Government in 2010.
- The Chairman of the Council is the Finance Minister and its members include the heads of financial sector Regulators (RBI, SEBI, PFRDA, IRDA), Finance Secretary and/or Secretary, Department of Economic Affairs, Secretary, Department of Financial Services, and Chief Economic Adviser.
- In May, 2018 government reconstituted FSDC to include the Minister of State responsible for the Department of Economic Affairs (DEA), Secretary of Department of Electronics and Information Technology, Chairperson of the Insolvency and Bankruptcy Board of India (IBBI) and the Revenue Secretary.
- Functions – It aims strengthening and institutionalising the mechanism of financial stability and development. It monitors macro-prudential supervision of the economy. It assesses the functioning of the large financial conglomerates. It addresses intra regulatory coordination issues.
- The Raghuram Rajan committee (2008) on financial sector reforms recommended for the creation of FSDC.