Q. With reference to ‘Financial Stability and Development Council’, consider the following statements:

  1. It is an organ of NITI Aayog.
  2. It is headed by the Union Finance Minister
  3. It monitors macro-prudential supervision of the economy.

Which of the statements given above is/ are correct?

  • 1 and 2 only
  • 3 only
  • 2 and 3 only
  • 1, 2 and 3

Answer: (c) 2 and 3 only

Financial Stability and Development Council:
  • It is a non-statutory apex council under the Ministry of Finance constituted by the Executive Order in 2010.
    • The Raghuram Rajan committee (2008) on financial sector reforms first proposed the creation of FSDC.
  • Objective:
    • Strengthening and institutionalizing the mechanism for maintaining financial stability, enhancing inter-regulatory coordination and promoting financial sector development.
  • Composition:
    • It is chaired by the Finance Minister and its members include the heads of all Financial Sector Regulators (RBI, SEBI, PFRDA & IRDA), Finance Secretary, Secretary of Department of Economic Affairs (DEA), Secretary of Department of Financial Services (DFS), and Chief Economic Adviser.
      • In 2018, the government reconstituted FSDC to include the Minister of State responsible for the Department of Economic Affairs (DEA), Secretary of Department of Electronics and Information Technology, Chairperson of the Insolvency and Bankruptcy Board of India (IBBI) and the Revenue Secretary.
    • The Council can invite experts to its meeting if required.
  • Functions:
    • To strengthen and institutionalize the mechanism for maintaining financial stability, enhancing inter-regulatory coordination and promoting financial sector development.
    • To monitor macro-prudential supervision of the economy. It assesses the functioning of large financial conglomerates.
  • Sub-committee of FSDC:
    • A sub-committee of FSDC has also been set up under the chairmanship of Governor RBI.
    • It discusses and decides on a range of issues relating to financial sector development and stability, including substantive issues relating to inter-regulatory coordination.