FSDC discusses need for more
early warning indicators for economy
Amid the continuing
liquidity crisis in banks of the West, the Financial Stability and Development
Council (FSDC) on Monday discussed the need for more early stress indicators in
India's financial sector to enable regulators to identify potential signs of
trouble and deal with them in advance.
maintain a constant vigil because ensuring financial-sector stability is their
shared responsibility. They must take appropriate and timely action to mitigate
any vulnerability and strengthen financial stability," Union Finance
Minister Nirmala Sitharaman, who heads the FSDC, told the regulators at the
meeting of the council in New Delhi.
This was the first FSDC
meeting after the 2023 Union Budget.
The regulators who
attended the meeting included Reserve Bank of India (RBI) Governor Shaktikanta
Das, Securities and Exchange Board of India (Sebi) Chairperson Madhabi Puri Buch,
Insurance Regulatory and Development Authority Chairman Debasish Panda, Pension
Fund Regulatory and Development Authority Chairman Deepak Mohanty, Insolvency
and Bankruptcy Board of India Chairman Ravi Mital, and International Financial
Services Centres Authority Chairman Injeti srinivas.
The five secretaries in
the finance ministry and Chief Economic Advisor V Anantha Nageswaran attended
discusses a number of issues starting with financial stability, noting that
there were daunting challenges coming from the global economy ... It discussed
early-warning indicators for the economy," Economic Affairs Secretary Ajay
Seth told media persons after the meeting.
"The RBI already has
some indicators but there needs to be a wide set of those that capture domestic
financial markets as well as global markets, and also the real economy. The
idea is to identify stresses early enough before they become prominent,"
The meeting comes amid a
number of regional bank failures in the US, with their impact spilling over to
financial situation is daunting but at the same time the Indian economy and the
Indian financial sector are well protected and well regulated," Seth said,
and added that the FSDC discussed whether there could be a knock-on effect for
India from the banking crisis and through what channels those could come.
"I can mention that
there is no spillover that can come to Indian banks from the Western financial
crisis," he said.
In the meeting it was
decided regulators should conduct a special drive to facilitate settling
unclaimed deposits and claims in the financial sector across all segments, such
as bank deposits, shares, mutual funds, and insurance. This follows the announcement
by Sitharaman in the last Union Budget that such steps would be taken.
"As for unclaimed
shares and dividends, a drive should be undertaken, especially in cases where
the data of the nominees is available. Where the nominee details are not there,
a process has to be put in place to identify them," Seth said.
An official statement by
the finance ministry on the meeting said the regulators needed to be proactive
and ensure cyber-security preparedness of information technology systems to
reduce the risk of cyber-attacks, protect sensitive financial data, and
maintain overall systems integrity.
A focused approach should
be adopted by the regulators to implement the announcements made in the Budget
2023-24, and for that timelines were also decided, the ministry said.
"On the government
securities markets, it was discussed how a seamless experience can be provided
to potential investors through the use of technology," Seth said.
The secretary said this
meant a seamless experience for retail investors, whether they used RBI- or
Sebi-regulated market infrastructure.
"It may be noted
that the G-Sec market continues to be regulated by the RBI only. Sebi-regulated
market infrastructure will connect to RBI-regulated market infrastructure
through technology (APIs) to provide seamless experience to retail
investors," he said.
The council discussed
debts of companies and households, a unique value proposition to take insurance
to the last mile, and the support required in terms of resolving inter-regulatory
issues for GIFT IFSC.