Financial Stability Development Council [FSDC]

By : Neha Dhyani

Updated : May 31, 2022, 9:47

The government of India established the Financial Stability Development Council [FSDC], as an independent apex council to overlook financial loopholes and intricate laws in India's financial system. The Raghuram Rajan Committee proposed the creation of this one of a kind regulatory organisation in 2008.

Eventually, India's former Finance Minister, Pranab Mukherjee, agreed to establish the Financial Stability Development Council [FSDC] in 2010 as an independent agency to deal with macroprudential and financial procedures throughout the country's financial system. Although the FSDC is at the highest level, it is not a government-backed up entity.

Due to the latest and most frequent global economic collapses, governments and institutions worldwide are under pressure to monitor their economic holdings. The Financial Stability Development Council [FSDC] is India's effort to improve its readiness to avoid economic and business catastrophes.

Financial Stability Development Council [FSDC] Composition and Funding

The Union Finance Minister of India is the chairperson of the Financial Stability Development Council [FSDC]. The Ministry of Finance and Department of Economic Affairs secretary is the secretary to the Financial Stability Development Council [FSDC].

Other members include -

  • The Governor of the Reserve Bank of India (RBI)
  • The Finance Secretary and Secretary of the Department of Economic Affairs (DEA)
  • Secretaries of Department of Financial Services (DFS), Ministry of Corporate Affairs, and Ministry of Electronics and Information Technology
  • Chief Economic Advisor to the Ministry of Finance
  • Chairpersons of Insolvency and Bankruptcy Board of India (IBBI), Insurance Regulatory and Development Authority (IRDA), Pension Fund Regulatory and Development Authority (PFRDA), Securities and Exchange Board of India (SEBI).

There are no finances set aside for the Council to carry out its functions.

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Functions of the Financial Stability Development Council [FSDC]

The Financial Stability and Development Council (FSDC) aims to:

  • Ensure financial stability and build in the tools into the economy to commit to the same
  • Foster cross-regulatory cooperation
  • Tracking the Indian economy's macroeconomic policy control
  • Managing India's foreign interactions with financial sector organisations such as the Financial Action Task Force (FATF), the Financial Stability Board (FSB), and other bodies as the Finance Minister may determine from time to time
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25th Meeting of Financial Stability Development Council [FSDC]

Union Finance Minister Smt. Nirmala Sitharaman presided over the 25th Financial Stability Development Council [FSDC]. The Council discussed the different mandates of FSDC and significant macro-financial concerns due to global and domestic trends.

The Council stated that the government and other authorities must keep a close eye on major financial institutions' financial conditions and operations, particularly as this could uncover financial vulnerabilities in the medium and long term.

The Council examined the steps that need to be taken to expand the financial sector further and ensure inclusive economic growth while maintaining macroeconomic stability. The Council talked about currency management operational issues.

In cooperation with financial market regulators, the government established the Financial Stability Development Council [FSDC] to reinforce and legitimise the system for maintaining financial stability, improving cross regulatory coordination, and stimulating economic development.

The Council supervises macro-prudential surveillance of the economy, particularly the functioning of big financial enterprises. It resolves inter-regulatory cooperation and associated financial industry development challenges while respecting regulators' autonomy. It also emphasises financial awareness and access to credit.

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FAQs on Financial Stability Development Council [FSDC]

Q.1. When and by whom was the idea of the Financial Stability Development Council [FSDC] proposed?

The idea of the Financial Stability Development Council [FSDC] was first proposed by the Raghuram Rajan Committee in 2008.

Q.2. When and by whom was the idea of the Financial Stability Development Council [FSDC] established?

The Financial Stability Development Council [FSDC] was established in 2010 by India's then-Finance Minister, Pranab Mukherjee.

Q.3. Who is the chairperson of the Financial Stability Development Council [FSDC]?

The Union Finance Minister of India is the chairperson of the Financial Stability Development Council [FSDC].

Q.4. Who presided over the 25th Financial Stability Development Council [FSDC]?

Union Finance Minister Smt. Nirmala Sitharaman presided over the 25th Financial Stability Development Council [FSDC].