The Union Government aims to develop an early-warning system for the financial market. This has become important in view of the increased volatility in the currency and equity markets.
Mr R. Gopalan, Secretary in the Department of Economic Affairs, chaired a high-level meeting on Monday to discuss structural issues of setting in place a Crisis Management Team for the financial sector. The meeting was attended by the Financial Service Secretary, Mr D.K. Mittal, the Disinvestment Secretary, Mr Mohammad Haleem Khan, and the Chief Economic Advisor, Mr Kaushik Basu, among others.
A senior Finance Ministry official said, “The team will see, analyse and suggest measures to tackle any development which can stress the financial system.” This team will consist of five-six persons and will be a part of the Financial Stability and Development Council. The Government does not want to be taken by surprise, so early detection and co-ordinated efforts will help to carry over the crisis in most effective way, the official added.
Members
The Deputy Governor of the Reserve Bank of India has been proposed to serve as the Chairman along with senior officials from the market regulator, Securities and Exchange Board of India, the insurance regulator, Insurance Regulatory and Development Authority, the pension regulator, Pension Fund Regulatory and Development Authority, and senior officials from the Ministry of Finance as members. A senior Government official familiar with the development said the effort was to bring a “sufficiently high level of representation, so that prompt decisions could be taken for effective crisis management”.
The official added that though every segment of the financial sector has crisis-prevention systems in place, still an integrated system was needed to avoid shocks which can quickly spread across market segments and institutions. The genesis of the crisis may be different from time to time, but the manifestation is similar. Timely management of the crisis requires early detection of fault lines based on information on diverse institutions and markets, the official explained.