The 24th meeting of the Financial Stability and Development Council (FSDC) was recently presided over by the Finance Minister. The council discussed an array of topics, such as the management of stressed assets, the strengthening of institutional mechanisms for financial stability analysis, issues related to the Insolvency and Bankruptcy Code (IBC), data sharing mechanisms of government authorities, internationalisation of the Indian rupee, and issues relating to the pension sector.
Establishment of FSDC
The FSDC is a non-statutory apex council. It falls under the jurisdiction of the Ministry of Finance and was constituted by an Executive Order in 2010. The proposition for the creation of FSDC first came from the Raghuram Rajan committee in 2008 during their discussions on financial sector reforms.
Composition of the FSDC
The council is chaired by the Finance Minister. Other members include the heads of all Financial Sector Regulators such as the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Pension Fund Regulatory and Development Authority (PFRDA), and Insurance Regulatory and Development Authority of India (IRDA). The Finance Secretary, Secretary of Department of Economic Affairs (DEA), Secretary of Department of Financial Services (DFS), and Chief Economic Adviser are also part of the council.
In 2018, the composition of the FSDC was restructured 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. The FSDC sub-committee is led by the Governor of RBI. The Council has the ability to invite experts to its meetings as necessary.
Functions of the FSDC
The main function of the FSDC is to strengthen and institutionalize the mechanism that maintains financial stability. In addition, it also aims to enhance inter-regulatory coordination and promote financial sector development. It’s responsible to keep a check on macro-prudential supervision of the economy, as well as assess the functioning of large financial conglomerates.
FSDC: A Key Player in Financial Stability
Given its comprehensive composition and wide-ranging functions, the FSDC plays a pivotal role in ensuring financial stability in India. Through the careful management of stressed assets, to understanding issues related to insolvency and bankruptcy, and even addressing concerns in the pension sector, the council has a far-reaching impact.
Internationalisation of the Indian Rupee
One of the key aspects discussed at the latest FSDC meeting was the internationalisation of the Indian Rupee. This topic represents a significant strategic issue for India’s financial policy, and it places the FSDC at the heart of these important discussions.
Importance of Data Sharing Mechanisms
The council also discussed the critical area of data sharing mechanisms of government authorities. As India moves into an increasingly digital era, the effective and secure sharing of data becomes paramount. The FSDC’s attention to this issue demonstrates its role in shaping India’s digital financial landscape.
Finally, the regular meetings of the FSDC are crucial as they help keep the council members updated on important financial matters, fostering collective decision-making and ensuring sustained and balanced economic growth for the country.
