Financial Stability and Development Council (FSDC)

Why in News? The Financial Stability and Development Council (FSDC), chaired by Union Finance Minister Nirmala Sitharaman, convened its 29th meeting in Mumbai recently to address critical issues impacting India’s financial sector.

Relevance : UPSC Pre &  Mains

Prelims : FSDC

Mains :   GS 3/Economy

Key Points from the FSDC Meeting:

Cybersecurity Enhancement: The FSDC deliberated on a financial sector-specific cybersecurity strategy to bolster cyber resilience, driven by an analysis of existing regulations and FSAP 2024-25 recommendations. This responds to rising cybersecurity threats, such as ransomware attacks on critical infrastructure.

Unclaimed Assets Reduction: Finance Minister Sitharaman urged regulators to expedite refunds of unclaimed assets, estimated at over Rs 78,000 crore, including dormant bank deposits, dividends, shares, and insurance funds. Special district-level camps were proposed to facilitate seamless refunds to rightful owners.

Streamlined KYC Norms: The council emphasized prescribing uniform KYC norms across the financial sector, including simplified and digitized processes for Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs), and Overseas Citizens of India (OCIs) in the securities market, to enhance user experience and curb illegal lending.

Macro-Financial Stability: The FSDC reviewed global and domestic macro-financial developments, stressing vigilance against systemic risks and the need for inter-regulatory coordination to ensure financial stability.

Financial Inclusion and Regulatory Reforms: Discussions included boosting investments, expanding factoring services, strengthening the account aggregator ecosystem, and implementing past budget announcements to promote financial inclusion.

About the Financial Stability and Development Council (FSDC):

The FSDC, established in December 2010, is India’s apex forum for coordinating financial sector policies to ensure stability, development, and inter-regulatory coherence. Chaired by the Union Finance Minister, it addresses systemic risks, promotes financial inclusion, and enhances regulatory coordination.

Key Functions:

• Financial Stability: Monitors macro-financial developments to mitigate systemic risks and strengthen resilience.
• Inter-Regulatory Coordination: Facilitates collaboration among regulators like RBI, SEBI, IRDAI, and PFRDA to streamline policies.
• Financial Sector Development: Promotes reforms to enhance investment, inclusion, and literacy.
• Crisis Management: Institutionalizes mechanisms to address financial crises and ensure economic security.