RBI asked for Empowered Committee under FSDC

RBI on date asked the Indian government to empower a committee under the proposed Financial Stability and Development Council, or FSDC to deal with inter-regulatory issues and financial stability. The committee would replace High-Level Coordination Committee on Capital and Financial Markets (HLCCFM). HLCCFM is a forum used for discussing and coordinating policy moves against regulators. RBI in its response to the concept paper on FSDC circulated to all financial sector regulators by the finance ministry said that a single committee empowered under the FSDC umbrella could address all issues pertaining to financial regulators as well as financial stability. The apex bank suggested that it could become the Vice-Chairman of the committee. The government is of the opinion that it should take the final decision as in the event of any crisis the taxpayers' money would be at stake and therefore a direct accountability was necessary. The proposal for FSDC was presented following the failure of HLCCFM that was formed after the securities scam of 1992 to resolve the dispute between IRDA and SEBI over ULIPs. The government's intention to form the FSDC was declared in the budget speech in Feb 2010 and it has been mentioned ever since that the council would not be responsible for performing the role of super-regulator. The RBI had protested then and when the government had restructured a dispute resolution mechanism and decided on the formation of the committee headed by the Finance Minister, RBI had changed the structure of the proposed committee.