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Financial Stability and Development Council (FSDC)

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Financial Stability and Development Council (FSDC)

Financial Stability and Development Council (FSDC)

Table of Contents

The Financial Stability and Development Council (FSDC) is a non-statutory apex-level body set up in 2010 by the Government of India to strengthen and institutionalize the mechanism for maintaining financial stability, enhancing inter-regulatory coordination, and promoting financial sector development.
It was established based on the recommendations of the Raghuram Rajan Committee (2008) on Financial Sector Reforms.
It operates under the Ministry of Finance.

Background

The 2008 Global Financial Crisis exposed gaps in the Indian regulatory framework.
The Raghuram Rajan Committee on Financial Sector Reforms (2008) recommended setting up an apex body to:
- Strengthen financial stability.
- Coordinate among regulators.
- Ensure the development of the financial sector.
- Based on this, the Government of India established the FSDC in December 2010.

Nature

It is a Non-statutory body (not created by an Act of Parliament).
It is an Apex-level institutional mechanism for financial sector oversight.

Composition

The FSDC is chaired by the Union Finance Minister.
Members include:
- Governor, RBI
- Finance Secretary and/or Secretary, Department of Economic Affairs
- Secretary, Department of Financial Services
- Chief Economic Adviser, Ministry of Finance
- Chairpersons of:
- SEBI (Securities and Exchange Board of India)
- IRDAI (Insurance Regulatory and Development Authority of India)
- PFRDA (Pension Fund Regulatory and Development Authority)
- IBBI (Insolvency and Bankruptcy Board of India)
- Secretary, Ministry of Corporate Affairs
- Secretary, Ministry of Electronics and Information Technology
- The Chairperson may invite any person whose presence is deemed necessary for any of its meetings.

Functions

It monitors macroprudential supervision of the economy, including the functioning of large financial conglomerates.
It addresses inter-regulatory coordination and financial sector development issues.
It also focuses on financial literacy and financial inclusion.

Significance of FSDC

Promotes system-wide risk monitoring
Encourages harmonization of regulatory practices
Helps tackle issues of regulatory overlap or gaps
Facilitates coordination during financial crises
Aids in formulating long-term policy for financial development and inclusion

In an increasingly interconnected and complex financial ecosystem, the Financial Stability and Development Council (FSDC) serves as a critical forum for high-level coordination among regulators, ensuring that macro-financial risks are identified early and addressed collectively.

FAQs

Q1. Is FSDC a statutory body?

No, FSDC is a non-statutory body established by an executive order in 2010.

Q2. Who chairs the Financial Stability and Development Council?

The Union Finance Minister chairs the FSDC.

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