In a surprising move, the Government has expanded the Financial Stability and Development Council (FSDC) by including one of the Junior Finance Ministers and two more bureaucrats, taking the total number of members to 12 (excluding the Chairperson).

The Union Finance Minister is the ex-officio Chairperson of the high power body, which was set up in December 2010. It aims to strengthen and institutionalise the mechanism for maintaining financial stability, enhancing inter-regulatory coordination and promoting financial sector development. The Government has so far amended the structure four times.

A gazette notification dated May 23 revealed that the council will include “Minister of State, in-charge of Department of Economic Affairs, Secretary Department of Revenue and Secretary, Ministry of Electronics and Information Technology” as members beside existing ones. It means present incumbents, Minister of State in the Finance handling Economic Affairs, P Radhakrishnan, Revenue Secretary Hasmukh Adhia and IT & Electronic Secretary Ajay Prakash Sawhney will be part of the council.

Earlier the council had “Governor, Reserve Bank of India (RBI), Finance Secretary and/ or Secretary, Department of Economic Affairs, Secretary, Department of Financial Services, Secretary, Ministry of Corporate Affairs, Chief Economic Adviser, Ministry of Finance, Chairperson, Securities and Exchange Board of India (SEBI), Chairperson, Insurance Regulatory and Development Authority of India (IRDAI), Chairperson, Pension Fund Regulatory and Development Authority (PFRDA), and Chairperson, Insolvency and Bankruptcy Board of India (IBBI)” as members. The expansion has taken place at a time when the President on May 14 announced, “During the period of indisposition of Arun Jaitley, Minister; the portfolios of Minister of Finance and Minister of Corporate Affairs held by him, be temporarily assigned to Piyush Goyal, in addition to his existing portfolios.” Jaitley is recovering from a renal transplant surgery and likely to be out of office for a couple of months.

Although no official explanation has been given for the expansion of the council, but it seems the Government wants to have all the plans in place. Considering the work load of the four portfolios, Finance, Corporate Affairs, Railway and Mines, of Goyal, there will always be an alternative to chair FSDC meeting. With the sliding rupee and boiling crude, the fiscal front appears to be very challenging and the role of FSDC becomes very crucial.

Without prejudice to the autonomy of regulators, the Council monitors macro prudential supervision of the economy, including functioning of large financial conglomerates, and addresses inter-regulatory coordination and financial sector development issues. It also focuses on financial literacy and financial inclusion. There is also a FSDC Sub-Committee headed by the RBI Governor. It meets more often than the full Council. All the members of the FSDC are also the members of the sub-committee. Additionally, all four Deputy Governors of the RBI and Additional Secretary, DEA, in charge of FSDC, are also members of the sub committee.

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