Sitharaman chairs 30th meeting of Financial Stability and Development Council (FSDC)

• Union Minister for Finance & Corporate Affairs Nirmala Sitharaman chaired the 30th meeting of the Financial Stability and Development Council (FSDC) in New Delhi on October 23.

Key points discussed during the meeting:

• The Council reviewed the cyber resilience of the Indian financial sector and took note of the Financial Sector Cyber Security Strategy (FSCSS) formulated by an Inter-Ministerial Group (IMG) comprising financial sector regulators and cybersecurity agencies.

• The implementation of the FSCSS is expected to strengthen the overall resilience of the Indian financial sector.

• The discussions also covered India’s preparedness to protect the critical information infrastructure and the resilience of protection systems, and improving cybersecurity preparedness of Regional Rural Banks (RRBs).

• Considering the importance of regulatory improvisation and digital modernisation in the financial sector, the FSDC discussed measures towards promoting innovation in the fintech sector and exploring the prospects of tokenisation of financial assets and other real-world assets.

Financial Stability and Development Council (FSDC)

• The Financial Stability and Development Council (FSDC) was set up by the government as the apex level forum in December 2010 with a view to strengthening and institutionalising the mechanism for maintaining financial stability, enhancing inter-regulatory coordination and promoting financial sector development.

• The Union Finance Minister is the chairperson of the Council. 

• Members include the Minister of State for finance, the heads of the financial sector regulators (RBI, SEBI, PFRDA, IRDA & Forward Markets Commission) and secretaries of the relevant ministries/departments of the government.

• The Council can invite experts to its meeting if required.

• The Financial Stability and Cyber Security (FS&CS) Division in the Department of Economic Affairs provides secretarial assistance to the FSDC.

Functions of FSDC:

• Without prejudice to the autonomy of regulators, the Council monitors macro prudential supervision of the economy, including functioning of large financial conglomerates, and addresses inter-regulatory coordination and financial sector development issues. 

• It also focuses on financial literacy and financial inclusion. 

• The Council deliberates on contextual issues covering financial stability, financial sector development.

• It coordinates India’s international interfaces with financial sector bodies like the Financial Action Task Force (FATF) and the Financial Stability Board (FSB). 

FSDC Sub-Committee (FSDC-SC)

• The FSDC is supported by a Sub-Committee (FSDC-SC), chaired by the RBI governor.

• Excluding the Chair of the FSDC and the MoS (Finance), all members of the FSDC are also the members of the Sub-Committee.

• Additionally, all four deputy governors (DG) of RBI, and secretary (FSDC), are also the members of the sub-committee. 

• Financial Stability Report (FSR) acts as a communication tool of the central bank in limiting instability by pointing out the key risks and vulnerabilities, which may have systemic impact, to policy makers, market participants and the public at large. 

• It reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC-SC) on risks to financial stability and the resilience of the financial system in the context of contemporaneous issues relating to development and regulation of the financial sector. 

(The author is a trainer for Civil Services aspirants.)