Financial Stability and Development Council

Financial Stability and Development Council

Background: Since April 2009, India was a member of the international agency looking into the
issue, namely, Financial Stability Board.
High Level Coordination Committee on Financial Markets (HLCCFM), was the agency facilitating
regulatory coordination, informally
HLCCFM was the forum to deal with inter-regulatory issues arising in the financial and capital
markets, as India follows a multi-regulatory regime for financial sector. It functioned under the
Chairmanship of Governor (RBI), with Chairman (SEBI) Secretary (Economic Affairs, Ministry of
Finance), Chairman (Insurance Regulatory and Development Authority) and Chairman (Pension
Fund Regulatory Development Authority- PFRDA) as members.
However, it was an informal body and had its own limitations despite being a good mechanism. In
the absence of formal instruments, clear specifications as to its functions/powers and an empowered
secretariat to nominate and follow up on the decisions of the HLCCFM, its effectiveness has been
limited.
The markets that are regulated by members of the HLCCFM have dramatically changed since 1992.
Over time, markets have become more complex and converged and are becoming increasingly
integrated. In such a scenario, if the regulators do not take an integrated and holistic view, it was
felt that outcomes will be sub-optimal.
Various Governmental Committees, as given below, have also recommended such an approach to
regulation:
! RBI’s Advisory Group on Securities Market Regulation (RBI-AGSMR 2001);
! High Level Expert Committee on Making Mumbai an International Financial Centre (MIFC
2007);
! Committee on Financial Sector Reforms (CFSR 2008);
! Committee on Financial Sector Assessment (CFSA 2009).
With a view to strengthen and institutionalize the mechanism for maintaining financial stability and
enhancing inter-regulatory coordination, Indian Government setup an apex-level Financial Stability
and Development Council (FSDC), in the Union Budget 2010–11.
Composition:
The Chairman of the FSDC is the Finance Minister of India and its members include the heads of
the financial sector regulatory authorities (i.e, SEBI, IRDA, RBI, PFRDA and FMC) , Finance Secretary
and/or Secretary, Department of Economic Affairs (Ministry of Finance), Secretary, (Department of
Financial Services, Ministry of Finance) and the Chief Economic Adviser.
The commodities markets regulator, Forward Markets Commission (FMC) was added to the FSDC
in December 2013 subsequent to shifting of administrative jurisdiction of commodities market
regulation from Ministry of Consumer Affairs to Ministry of Finance.
Mandate: The Council would monitor macro prudential supervision of the economy, including the
functioning of large financial conglomerates. It will address inter-regulatory coordination issues and
thus spur financial sector development. It will also focus on financial literacy and financial inclusion.
What distinguishes FSDC from other such similarly situated organizations across the globe is the
additional mandate given for development of financial sector.

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