Finance Minister Nirmala Sitharaman is set to chair the 29th meeting of the Financial Stability and Development Council (FSDC) on June 10 in Mumbai. The meeting occurs against a backdrop of global economic uncertainties and aims to assess and address key issues impacting India's financial stability and economic growth. Top financial regulators and policymakers are expected to attend, including Reserve Bank of India (RBI) Governor Sanjay Malhotra.
The FSDC, an apex non-statutory body, plays a crucial role in strengthening and institutionalizing mechanisms for maintaining financial stability, financial sector development, and inter-regulatory coordination. It also monitors macro-prudential regulation of the economy. The council's formation was initially recommended by the Raghuram Rajan Committee in 2008, and it was established by the Government of India in 2010. The FSDC serves as a central coordination mechanism for all major financial regulators and ministries within India's multi-regulatory framework.
Several critical issues are expected to be on the agenda for the upcoming meeting. These include a comprehensive review of financial stability risks, both domestic and external, with a particular focus on the resilience of India's credit and capital markets. The council will likely discuss institutional preparedness for managing potential economic spillovers and the progress of initiatives related to financial inclusion and credit access for Micro, Small, and Medium Enterprises (MSMEs).
One significant area of concern is the rise of digital fraud, which poses a considerable challenge to the financial system. The FSDC will explore ways to curb digital fraud, a topic of increasing importance for financial regulators. Discussions will likely involve strengthening inter-regulatory coordination to combat this menace effectively.
The meeting will also address the simplification and digitalization of the Central KYC (CKYC) process within the financial sector. A streamlined CKYC process promises to enhance verification and customer onboarding for companies across the financial sector.
The FSDC will also review the progress of measures approved earlier, aimed at the further development of the financial sector and the achievement of inclusive economic growth with macroeconomic stability. This includes evaluating how well regulatory frameworks support the government's priorities, such as enhancing credit delivery to productive sectors, expanding financial literacy, and fostering innovation while maintaining prudential norms. Bond market development, deeper penetration of insurance and pensions, and digital finance oversight are also likely to be discussed.
India's economic performance will be a key focal point. The council will review India's 6.5% growth in FY25, which, while notable, represents the slowest growth in the last four years. The recent record dividend payout of Rs 2.7 lakh crore by the Reserve Bank will also factor into the discussions. The meeting aims to recalibrate regulatory priorities to align with the government's broader policy objectives.
The FSDC Sub-Committee, chaired by the RBI Governor, will also have its activities reviewed. This sub-committee is crucial for monitoring emerging risks and fostering inter-agency coordination among financial regulators. The council may explore ways to strengthen this coordination mechanism further, given the increasing complexity of India's financial sector.
Ultimately, the FSDC meeting on June 10 seeks to ensure that India's financial sector strategy is sharply focused on macroeconomic stability, market resilience, and inclusive growth, especially as global risks become more intertwined with domestic priorities.
