India will not let guards down on preparedness to deal with external sector vulnerabilities including those arising from Brexit, Finance Minister Arun Jaitley and financial sector regulators including RBI Governor Raghuram Rajan reaffirmed on Tuesday.
The Financial Stability Development Council (FSDC) met for the 15th time on Tuesday since its formation in December 2010 to deliberate on the macro-economic situation and financial developments globally.
Among the subjects discussed at the Council meeting, headed by the Finance Minister, was the rising bad loans with banks.
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FSDC, which includes RBI Governor and other financial regulators, reviewed the measures taken by the government and the central bank for handling the stressed assets and discussed ways to manage the situation.
It called for continuous monitoring of the situation developing from Britain’s exit from the European Union as it would take long time for the full scenario to unfold, official sources said.
There should be no complacency on Brexit situation, the FSDC said.
“The Council also discussed issues relating to developing a comprehensive framework for identification of Systematically Important Financial Institutions (SIFIs) across all sub-sectors of financial sector,” said an official statement issued after the meeting.
On the issue of maturity of concessional swaps of 2013 against CNR deposits during September-December 2016, FSDC noted the steps taken by RBI to suitably address the issue and its consequences.
Chief Economic Adviser Arvind Subramanian gave an overview of the state of macro-economy highlighting important issues.
With an uncertain global economy and high volatility in financial markets confronting emerging economies, the Council was of the opinion that India is “much better placed” on back of improvement in macro fundamentals, slew of reforms and large forex reserves.
“The Council noted that uncertainty in global economy and high volatility in the financial markets are prominent risks confronting the emerging market economies.
“India however appears to be much better placed today on the back of improvement in its macro-economic fundamentals, recent financial sector reforms by government and large forex reserves, which provides cushion against financial market volatility,” the statement said.
With revival of sentiment and certain signs of pick up in industrial activity, a good monsoon is expected to further strengthen growth in India which, at 7.6 per cent in 2015-16, clocked the fastest rate of expansion among major economies.
“Members agreed on the need to continue to be in a state of preparedness for managing any external sector vulnerabilities, including those emerging from Brexit and its consequences,” the statement said.
A brief report on the activities undertaken by the FSDC sub-committee chaired by Rajan was placed before the FSDC.
FSDC was set up in December 2010 to strengthen and institutionalise the mechanism for maintaining financial stability, enhancing inter-regulatory coordination and promoting financial sector development.
Its members include heads of financial sector regulators – RBI, SEBI, PFRDA, IRDA and FMC along with top Finance Ministry bureaucrats and the Chief Economic Adviser.
Finance Secretary Ashok Lavasa, Economic Affairs Secretary Shaktikanta Das and Financial Services Secretary Anjuly Chib Duggal attended Tuesday’s meeting.
Besides Rajan, Sebi Chairman U K Sinha, IRDAI Chairman T S Vijayan and PFRDA Chairman Hemant G Contractor were also present at the meeting.
An overview of state of the economy was presented by the CEA as also the impact of global events are Brexit.
FSDC monitors macro prudential supervision of the economy, including functioning of large financial conglomerates, and addresses inter-regulatory coordination and financial sector development issues.
It also focuses on financial literacy and financial inclusion. The last meeting was held on January 13.