No agenda listed for FSDC's next meet, FinMin expresses surprise

Regulators fail to come up with issues to discuss at FSDC sub-committee meeting this month

The ministry of finance has expressed surprise that no financial sector regulator has offered any agenda for the forthcoming meeting of the Financial Stability and Development Council (FSDC). The sub-committee of the FSDC, which is chaired by the Governor of the Reserve Bank of India (RBI), is scheduled to meet in August. 

“We are not able to get any regulator to offer any agenda for discussion at the FSDC. It has become a forum for each of them to only make a presentation about their sector,” an official at the ministry said. 

For every FSDC meeting, the ministry sends a note to the participating regulators to suggest subjects they wish to be discussed and resolved. However, no one has offered any agenda items so far. The ministry has asked the regulators for a fresh list of agenda. 

The FSDC comprises India’s financial sector regulators, including the Reserve Bank of India, the Securities and Exchange Board of India, Insurance Regulatory and Development Authority of India (IRDA), Pension Fund Regulatory and Development Authority, Insolvency and Bankruptcy Board of India and the International Financial Services Centres Authority. The participating ministries are the ministry of corporate affairs, ministry of electronics and information technology and the department for financial services. The Chief Economic Adviser is also part of the FSDC. 

While the body is chaired by the finance minister and meets only intermittently, the sub-committee of FSDC, headed by the RBI Governor, meets at least twice a year. The last meeting of the sub-committee took place in January, 2021. 

The official said that of late, the regulators have been giving presentations of the developments in their respective sectors at these meetings. But there has been no candid exchange of views on issues that require the forum to intervene. 

For instance, the RBI has not sought suggestions from the FSDC on the challenge from crypto currencies, and neither has the IRDA sought its inputs on whether insurance companies should sell full-fledged pension policies. Both these issues present regulatory challenges and are of keen interest to industry.  

In the past, too, major crises in the financial sector, such as those of  Yes Bank, IL&FS or PMC Bank, were not picked up for resolution at the sub-committee meetings, said a top government official. All that was put on the table were the steps taken by the regulators after the crisis had blown over.

In the absence of a genuine exchange of views at the FSDC meetings, some regulators and  departments have begun to send deputies to fill in for them. 

However, at a recent seminar, RBI Deputy Governor MK Jain had defended the performance of the FSDC, claiming that it was a strong presence for everyone concerned, one “where we interact regularly quite often. Now we are planning to convene these meetings more often”. 

Some technical groups set up by the FSDC, such as the Inter-regulatory Technical Group, the Technical Group on Financial Inclusion and Financial Literacy and the Inter-regulatory Forum for Monitoring Financial Conglomerates, have, in fact, been meeting more often. Jain said the scope of these meetings have expanded to include the results of the stress tests conducted on financial entities. “Many meetings of these bodies were conducted during the peak of Covid,” he said. 

The FSDC was set up in 2010 to replace the high-level coordination committee on financial markets which was formed after the 1992 Harshad Mehta scam. It is not a statutory body, but because it brings together the heads of all financial sector regulators, it has the potential to exert a massive influence on framing policies and regulations in the sector.