The Centre seeks to allay fears of the RBI over the autonomy of regulators
Even as the Financial Stability and Development Council (FSDC) is to be headed by the Finance Minister, the government on Tuesday sought to allay the apprehensions of the Reserve Bank of India (RBI) over the autonomy of regulators by appointing the apex bank's Governor as the head of a sub-committee of the body being set up to maintain financial stability.
“It [formation of FSDC] will be announced shortly,” Finance Minister Pranab Mukherjee said after his meeting with various regulators in the financial sector, namely, the RBI, SEBI (for markets), IRDA (for insurance) and PFRDA (for pensions) on the proposed FSDC.
“The Council would have one sub-committee which would be headed by RBI Governor,” a Finance Ministry statement later said.
Ostensibly, the move to appoint the RBI Governor as head of the FSDC sub-committee to look into inter-regulatory issues has come about in the wake of the apex bank expressing concerns over breach of the regulators' autonomy.
Following the turf war between SEBI and the IRDA over the jurisdiction on mutual funds, the RBI Governor's position was elevated in a recently formed joint panel that was set up to resolve the controversy.
The apex bank's Governor was made Vice-Chairman of the committee, a higher position from the earlier status of just being a member.
More recently, RBI Governor D. Subbarao had noted that the central bank has a greater role than merely containing inflation, indicating thereby that its task was also to maintain financial stability, the very reason for which the FSDC was being set up.