Financial Stability and Development Council | 16 Sep 2022

Why in News?

Recently, the Union Minister of Finance and Corporate Affairs chaired the 26th Meeting of the Financial Stability and Development Council (FSDC).

What are the Key Highlights?

  • The council stressed on the early warning indicators for the economy and the preparedness to deal with them, improving the efficiency of the existing financial and credit information systems, and issues of governance and management in systemically important financial institutions.
  • It was noted that there is a need to monitor the financial sector risks, the financial conditions and market developments on a continuous basis by the Government and the regulators so that appropriate and timely action can be taken so as to mitigate any vulnerability and strengthen financial stability.
  • The council took note of the preparation in respect of financial sector issues to be taken up during India’s G20 Presidency in 2023.

What is FSDC?

  • Establishment:
    • It is a non-statutory apex council under the Ministry of Finance constituted by the Executive Order in 2010.
    • The Raghuram Rajan committee (2008) on financial sector reforms first proposed the creation of FSDC.
  • Composition:
    • It is chaired by the Finance Minister and its members include the heads of all Financial Sector Regulators (RBI, SEBI, PFRDA & IRDA), Finance Secretary, Secretary of Department of Economic Affairs (DEA), Secretary of Department of Financial Services (DFS), and Chief Economic Adviser.
      • In 2018, the 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.
    • FSDC sub-committee is headed by the Governor of RBI.
    • The Council can invite experts to its meeting if required.
  • Functions:
    • To strengthen and institutionalize the mechanism for maintaining financial stability, enhancing inter-regulatory coordination and promoting financial sector development.
    • To monitor macro-prudential supervision of the economy. It assesses the functioning of large financial conglomerates.

UPSC Civil Services, Previous Year Questions (PYQ)

Q. With reference to ‘Financial Stability and Development Council’, consider the following statements: (2016)

  1. It is an organ of NITI Aayog.
  2. It is headed by the Union Finance Minister.
  3. It monitors macro-prudential supervision of the economy.

Which of the statements given above is/are correct?

(a) 1 and 2 only
(b) 3 only
(c) 2 and 3 only
(d) 1, 2 and 3

Ans: (c)

Source: PIB