NEW DELHI: India will continue to be in a ‘state of preparedness’ to manage any external sector vulnerabilities, including those emerging from Brexit and its consequences.
This was decided in a meeting of the Financial Stability and Development Council (FSDC) chaired by finance minister Arun Jaitley.
All financial regulators, secretaries of finance ministry and chief economic advisor are members of FSDC, which was set up in December 2010 to strengthen and institutionalise the mechanism for maintaining financial stability, enhance inter-regulatory coordination and promote financial sector development.
“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 finance ministry said in a statement after the meeting.
FSDC 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 and cautioning against any complacency, a government source told ET.
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.
Jaitley identified strategy to improve the overall performance of public sector banks, make stalled projects functional and economically viable and increase private sector investment among others as key challenges before the government.
“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 the statement.
On the issue of maturity of concessional swaps of 2013 against FCNR deposits during September-December 2016, FSDC noted the steps taken by RBI to suitably address the issue and its consequences. There are apprehension that outflow may cause some financial market volatility.
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% in 2015-16, clocked the fastest rate of expansion among major economies.
A brief report on the activities undertaken by the FSDC sub-committee chaired by RBI governor was placed before the FSDC. Finance secretary Ashok Lavasa, economic affairs secretary Shaktikanta Das and dinancial services secretary Anjuly Chib Duggal attended the meeting.
Besides RBI governor Raghuram Rajan, Sebi Chairman U K Sinha, IRDAI Chairman TS Vijayan and PFRDA Chairman Hemant G Contractor were also present at the meeting. FSDC monitors macro prudential supervision of the economy, including functioning of large financial conglomerates, and addresses inter-regulatory coordination and financial sector development issues.