Raghuram Rajan committee in 2008 proposed an apex body called financial stability and development council. Later in 2010, it was set up as an autonomous body.
Thus, this apex body deals with financial regularities in the same sector around the country. Also, the organization is not a statutory body.
Financial Stability and Development Council
Financial stability and development council which is also known as FSDC was introduced to look after the financial regularities in the financial sector.
So, there are various segments of financial institutions in India that look after the different sectors.
For example, RBI looks out for NBFCs and commercial banks, SEBI takes care of the capital market, etc. So, FSDC ensures that there is better coordination between the financial sectors.
Furthermore, FSDC ensures better efficiency along with avoiding the conflicts between the functions of these institutions. Thus, keeping all these views in mind FSDC was formed in 2010 with finance minister as it’s chairman.
Also, this apex body will act as an intermediary between different financial sectors like the SEBI, RBI, IRDA, and PFRDA. So, the primary task of this body is to look out for macro related supervisions of the Indian economy.
It also looks after the development and functioning of large multinational companies and deals with inter-regulated issues.
What is FSDC Composed of?
There are several governing bodies that make up for the development council. Also, the Finance minister of India is the chairman of this council. It’s members are:
- Chairman of SEBI
- Reserve Bank of India’s Governor
- Chairman of IRDA (Insurance Regulatory and development authority)
- Chairman of PFRDA
- Finance secretary
- Secretary of the department of financial services
- Chief economic advisor
Other than this the council can invite the expert when it requires. The Secretariat of FSDC is also in the department of economic affairs.
Sub-committee of FSDC
This council along with other committees also has a subcommittee. Also, this subcommittee is chaired by the Governor of the RBI. The meetings of this committee happen more frequently than the full councils.
Furthermore, the members that are included in the FSDC are also the members of the subcommittee. But there are some additional members in this committee.
Also, this includes governors of the RBI, DEA, and additional secretary.
Functions of FSDC
- FSDC plays an edge between financial inclusion and financial literacy.
- Furthermore, it is responsible for the assessment of the functioning of large financial organizations and controls the macro-prudential regulations of the economy.
- Also, FSDC strengths and institutionalizes the mechanism for financial development and stability.
- The issues related to inter-regulatory coordination are also taken care of by the FSDC.
There are other groups as well within FSDC. These are:
- A technical group for financial literacy and financial inclusion.
- Early warning group
- Monitoring group and macro-financial
- The inter-regulatory group for technical issues
- Working group responsible for the resolution of financial institutions.
Practice Questions on FSDC
Q. The FSDC council was set up on December 30, 2010. Who among the following is not a member of the council?
A. RBI Governor
B. SEBI chairman
C. IRDAI chairman
D. None of the above
Answer: D. None of the above
Q. The term FSDC stands for
A. Financial stability and development council
B. Financial suitability and developed council
C. Financial sustainability and development council
D. None of the above
Answer: A. Finacial stability and development council
Q. Who is the chairman of the financial stability and development council?
A. The RBI governor
B. The vice president of India
C. Finance minister of India
D. Prime minister of India
Answer: C. Finance minister of India