Amid concerns within the Reserve Bank of India (RBI) about it being overshadowed by a super regulator, a government official said the proposed Financial Stability and Development Council will not dilute the central bank's autonomy.
Officials in the Finance Ministry drew a parallel with the US' Financial Stability Oversight Council (FSOC), which was set up earlier this year, to drive home the point that FSDC too would not interfere with the working of financial sector regulators.
The US FSOC was set up under the Dodd-Frank Wall Street Reform and Consumer Protection Act, after lessons learnt from the 2008 global financial crisis.
The US body is a collaborative body that brings together the expertise of the federal financial regulators, and insurance expert appointed by the President and state regulators.
India's proposed FSDC will undertake macro prudential supervision of the economy, including functioning of large financial conglomerates and address inter-regulatory coordination issues, Finance Minister Pranab Mukherjee had said at an investment forum in New York last week.
The Finance Minister will head the FSDC, which will have financial sector regulators as its members.
RBI Governor, who was roped in as vice chairman of a council set up to resolve a turf row between capital market and insurance sector regulators, may not, however, be vice chairman of the proposed council.
When specifically asked whether the RBI Governor will be the vice-chairman in the proposed council, the sources said they do not think so.
It is the Finance Minister who is answerable to Parliament and not RBI or other financial regualator they said by way of justification.
Recently in Hyderabad, RBI Governor D Subbarao had said that the RBI has a role greater than merely containing inflation, a comment that indicate that the central bank also had a task of maintaining financial stability, the purpose for which FSDC is being set up.
Besides, FSDC's mandate would be to prevent occurence of conflicts (between financial sector regulators).
It will will also look at next stage of reforms in the financial sector, considered the engine of growth in times to come, sources added.
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