UPSC Prelims 2016 Q56: Indian Economy – Banking & Financial Sector
With reference to 'Financial Stability and Development Council', consider the following
statements:
1. It is an organ of NITI Aayog.
2. It is headed by the Union Finance Minister.
3. It monitors macroprudential supervision of the economy.
Which of the statements given above is/are correct?
- (a) 1 and 2 only
- (b) 3 only
- (c) 2 and 3 only
- (d) 1, 2 and 3
Answer: (c) 2 and 3 only
Explanation
Financial Stability and Development Council (FSDC)
Set up in December 2010 by an executive order.
It is a non-statutory body.
| Statement | Verdict | Fact |
|---|---|---|
| 1. It is an organ of NITI Aayog | Incorrect | It works under the Ministry of Finance |
| 2. It is headed by the Union Finance Minister | Correct | The Finance Minister is the Chairperson |
| 3. It monitors macroprudential supervision of the economy | Correct | It also handles inter-regulatory coordination |
Members and structure:
| Feature | Detail |
|---|---|
| Members | RBI Governor; heads of SEBI, IRDAI, PFRDA and IBBI; Finance Secretary and other secretaries |
| Sub-committee | Chaired by the RBI Governor |
| Idea from | Raghuram Rajan Committee on financial sector reforms (2008) |
| Other tasks | Financial literacy and financial inclusion |
Answer: (c) 2 and 3 only.
Why each option is right or wrong
- (a) Incorrect. Statement 1 is false; the Council is not an organ of NITI Aayog.
- (b) Incorrect. Statement 2 is also true: the Union Finance Minister heads it.
- (c) CORRECT. It is headed by the Finance Minister and monitors macroprudential supervision.
- (d) Incorrect. Statement 1 is false; it sits under the Ministry of Finance.
Key point
FSDC (2010): non-statutory council chaired by the Finance Minister; members are financial regulators; sub-committee under the RBI Governor.
Remember
FSDC = Finance Minister chairs; regulators are members.
Common mistakes
- Linking the Council to NITI Aayog or the old Planning Commission.
- Thinking the RBI Governor chairs the Council; he chairs only its sub-committee.
- Assuming it is a statutory body.
Exam tip
Finance bodies sit with the Finance Ministry. 'Organ of NITI Aayog' is a repeated trap.
Sources
- Department of Economic Affairs, Ministry of Finance — Financial Stability and Development Council
- Reserve Bank of India — Financial Stability Report