Finance Minister Nirmala Sitharaman on Thursday chaired a meeting of the Financial Stability and Development Council (FSDC), which reviewed the state of the economy, including stress in the financial sector.
The FSDC is the apex body of financial sector regulators, headed by the Finance Minister. The Council reviewed the current global and domestic macro-economic situation and financial stability and vulnerabilities issues, including those concerning NBFCs and credit rating agencies (CRAs).
“Overall macro-economic issues and the state of the economy were discussed in details. There were some inter-regulatory issues which were also discussed. We also discussed about cybersecurity issues that were one important component of the discussion,” Reserve Bank of India (RBI) Governor Shaktikanta Das told reporters after the meeting.
The 21st meeting of FSDC comes against the backdrop of the economy hitting a six-year low growth rate of 5 per cent in the first quarter of fiscal 2019-20.
Going forward, what kind of approach the regulators take on various issues particularly where there is inter-regulatory overlap were discussed, he said. The current status of the NBFCs was also discussed, Das said, adding, there are a large number of non-banking financial companies (NBFCs) that are functioning well.
“Even today, we have quite a good number of NBFCs, a large number of NBFCs which are well-functioning, which are able to access funds from the market which are able to access loans from the banks, and in fact, some of them have got overseas funding also,” he added.
The RBI is very closely monitoring the top 50 NBFCs, which represent roughly 75 per cent of the asset size of the sector.
“We are having regular interaction with the management of those NBFCs where we see any signs of vulnerability and whenever there is any vulnerable signs visible, we are asking the management of the company to meet RBI and we asked them to take corrective steps through market mechanisms,” the RBI Governor said.
After the nearly two-hour meeting, Finance Secretary Rajiv Kumar said, “The meeting was very constructive and it took stock of entire financial system and other issues.” The RBI and other regulators are looking at it holistically, he said, when asked about stress in the financial sector.
The Council reviewed the action taken by members on the decisions taken by FSDC earlier and held discussions on the proposals submitted for further strengthening of the resolution framework and framework for cybersecurity of the financial sector, Kumar said.
Besides the RBI Governor, Securities and Exchange Board of India chairman Ajay Tyagi, Insurance Regulatory and Development Authority of India chairman Subhash Chandra Khuntia, Insolvency and Bankruptcy Board of India chairman M S Sahoo and Economic Affairs Secretary Atanu Chakraborty attended the meet.