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Consider the following statements regarding Financial Stability and Development Council (FSDC):
  1. It monitors macroprudential supervision of the economy, including the functioning of large financial conglomerates.
  2. It is chaired by the Union Finance Minister of India.
Which of the statements given above is/are correct?
  • a)
    1 only
  • b)
    2 only
  • c)
    Both 1 and 2
  • d)
    Neither 1 nor 2
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
Consider the following statements regarding Financial Stability and De...
Finance Minister recently chaired the 27th meeting of the Financial Stability and Development Council (FSDC).
About Financial Stability and Development Council (FSDC):
  • It is an apex-level forum constituted by the Government of India in December 2010.
  • Status: FSDC is not a statutory bodyNo funds are separately allocated to the council for undertaking its activities.
  • ObjectiveStrengthening and institutionalizing the mechanism for maintaining financial stability, enhancing inter-regulatory coordination and promoting financial sector development.
  • Composition:
  • It is chaired by the Union Finance Minister of India.
  • Its members include the heads of financial sector Regulators (RBI, SEBI, PFRDA, IRDA & FMC) Finance Secretary and/or Secretary, Department of Economic Affairs, Secretary, Department of Financial Services, and Chief Economic Adviser.
  • The Council can invite experts to its meeting if required.
  • Functions:
  • It monitors macroprudential supervision of the economy, including the functioning of large financial conglomerates.
  • It addresses inter-regulatory coordination and financial sector development issues.
  • It also focuses on financial literacy and financial inclusion.
  • 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.
Hence both statements are correct.
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Community Answer
Consider the following statements regarding Financial Stability and De...
The correct answer is option 'C' - Both 1 and 2.

Financial Stability and Development Council (FSDC) is an apex body in India that monitors and coordinates the financial stability and development of the country. Let's analyze each statement individually to understand why both statements are correct:

Statement 1: It monitors macroprudential supervision of the economy, including the functioning of large financial conglomerates.
The FSDC is responsible for monitoring and ensuring financial stability in the economy. It oversees the macroprudential supervision, which refers to the regulation and supervision of the entire financial system to identify and mitigate risks that could potentially harm the stability of the system as a whole. This includes monitoring the functioning of large financial conglomerates, which are entities that have diversified financial operations across various sectors.

Statement 2: It is chaired by the Union Finance Minister of India.
The FSDC is chaired by the Union Finance Minister of India. The Finance Minister is responsible for leading the discussions and decision-making processes of the council. As the head of the council, the Finance Minister plays a crucial role in coordinating and directing the efforts of various stakeholders to achieve financial stability and development objectives.

The FSDC was established in 2010 as a response to the global financial crisis of 2008. Its primary objective is to strengthen and institutionalize the mechanism for maintaining financial stability in India. It brings together representatives from various financial sector regulators, such as the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDAI), Pension Fund Regulatory and Development Authority (PFRDA), and Ministry of Finance, among others.

The council meets periodically to discuss and deliberate on issues related to financial stability and development. It focuses on identifying potential risks to the financial system, formulating policies to address those risks, and coordinating efforts among different regulators to implement those policies effectively. The FSDC's role is crucial in maintaining the stability and resilience of the Indian financial system, which is essential for sustainable economic growth.
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