Context

Recently, a meeting of the Sub-Committee of the Financial Stability and Development Council (FSDC) headed by RBI Governor Shakti Kant Das was held to in Mumbai.

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• The Sub-Committee reviewed the major developments on the global and domestic fronts that impinge on the financial stability of the country.
• It discussed ways to address challenges pertaining to the quality of credit ratings; and interlinkages between housing finance companies and housing developers.
• It also deliberated on interlinking of various regulatory databases and National Strategy for Financial Inclusion (NSFI).
• It reviewed the functioning of State Level Coordination Committee (SLCCs) in various States / Union Territories (UTs), activities of its various Technical Groups, and a thematic study on financial inclusion and financial stability.

What is Financial Stability and Development Council?

• It is an apex regulatory body constituted by the Government of India.
• FSDC was created after the global financial crisis of 2008 when some similar institutions were created in some other countries.
• FSDC has replaced the High-Level Coordination Committee on Financial Markets, which was facilitating the regulatory coordination functions prior to setting up of FSDC, though it was not a formal body.
• It was constituted on the recommendations of the Raghuram Rajan Committee on Financial Sector Reforms in 2008. The FSDC is an autonomous body which deals with the financial regularities in the entire financial sector of India.

What are the functions of FSDC?

• As the name of the council itself states about its functions, the FSDC is responsible for Financial stability and the Development of Financial Sector in India.
• Other than these two functions, FSDC is also responsible for Inter-regulatory coordination, financial literacy and financial inclusion within the country.
• No funds are allocated separately to the council for undertaking its activities.

Who are the members of FSDC?

• The Finance Minister of India is the chairman of Financial Stability and Development Council.

Members from Regulatory Bodies

• RBI Governor (RBI Governor is also the head of FSDC Sub-committee).
• Chairman of Securities and Exchange Board of India i.e. SEBI.
• Chairman of Insurance Regulatory and Development Authority of India i.e. IRDAI.
• Chairman of Pension Fund Regulatory and Development Authority i.e. PFRDA.
• Chairman of Insolvency and Bankruptcy Board of India i.e. IBBI.

Members from Government Departments

• Finance Secretary or Secretary of Department of Economic Affairs.
• Secretary of Department of Financial Services.
• Secretary of Ministry of Corporate Affairs.
• Chief Economic Advisor, Ministry of Finance.
• Secretary of Ministry of Electronics & Information Technology i.e. MeitY. (Included in May 2018 by the Government of India through a Gazette notification. The reason to add was increased focus of the government on the digital economy).
  
  

  19th Meeting of the FSDC It was held in New Delhi in October 2018. The council discussed many issues related to real interest rate, current liquidity situation, including segmental liquidity position in NBFCs (Non-Banking Financial Companies) and the mutual fund sector. RBI Governor Urjit Patel said the liquidity scenario among NBFCs was not as severe as it was being made out to be. But he also assured the government that the RBI would ensure adequate liquidity in the system. All four RBI deputy governors attended the FSDC meeting along with RBI Governor Urjit Patel. Currently, the four Deputy Governors of RBI are as shown in the picture below.