The Financial Sector Development Council (FSDC) is an apex-level body constituted by the government of India. It was set up in December 2010, in response to the recommendations of the Raghuram Rajan Committee on Financial Sector Reforms.
The FSDC is chaired by the Finance Minister and its members include the Governor of the Reserve Bank of India (RBI), the Chief Economic Adviser to the Government of India, and the heads of other financial sector regulators.
The FSDC’s main objective is to promote financial stability in India. It does this by:
- Monitoring the financial system and identifying risks to its stability
- Promoting coordination among financial sector regulators
- Formulating and implementing policies to enhance financial stability
Functions of the FSDC
The FSDC has the following functions:
- Monitoring the financial system: The FSDC monitors the financial system on a continuous basis to identify risks to its stability. It does this by collecting and analyzing data on the financial system, and by conducting stress tests.
- Promoting coordination among financial sector regulators: The FSDC promotes coordination among financial sector regulators to ensure that they are working together to promote financial stability. It does this by setting up working groups and by issuing joint statements.
- Formulating and implementing policies to enhance financial stability: The FSDC formulates and implements policies to enhance financial stability. These policies can include measures to strengthen prudential regulations, to promote risk management, and to improve market infrastructure.
- Enhancing financial inclusion: The FSDC also promotes financial inclusion, which is the process of ensuring that everyone has access to financial services. This includes promoting the use of digital payments and financial literacy.
- Overseeing the development of the financial sector: The FSDC also oversees the development of the financial sector, with the aim of ensuring that it is efficient and competitive. This includes promoting the development of new products and services, and encouraging foreign investment in the financial sector.
Multiple Choice Questions
- Which of the following is not a function of the FSDC?
- Monitoring the financial system
- Promoting coordination among financial sector regulators
- Formulating and implementing policies to enhance financial stability
- Regulating the financial sector
- The answer is Regulating the financial sector. The FSDC does not regulate the financial sector. This is the responsibility of the individual financial sector regulators.
- Which of the following is the most important objective of the FSDC?
- To promote financial stability
- To enhance financial inclusion
- To promote financial literacy
- To develop the financial sector
- The answer is To promote financial stability. The FSDC’s main objective is to promote financial stability in India.
- Which of the following is the most significant impact of the FSDC?
- The identification and mitigation of risks to the financial system
- The promotion of coordination among financial sector regulators
- The formulation and implementation of policies to enhance financial stability
- All of the above
- The answer is All of the above. The FSDC has had a positive impact on financial stability in India by identifying and mitigating risks to the financial system, promoting coordination among financial sector regulators, and formulating and implementing policies to enhance stability.
Conclusion
The FSDC is an important body for promoting financial stability in India. It has had a positive impact on the Indian financial system by identifying and mitigating risks, promoting coordination among regulators, and formulating and implementing policies to enhance stability. The FSDC will continue to play an important role in ensuring the stability of the Indian financial system in the years to come.