FSDC not meant to be a super regulator'

The Union finance ministry has again taken pains to emphasize that the newly formed Financial Stability and Development Council (FSDC) won’t be a ‘super regulator’. “That is out of the question,” a key ministry official told Business Standard. FSDC, he noted, was not a statutory body. The commission, to be chaired by the finance minister, is meant as a broad “regulatory collegium”. There has been renewed discussion recently, as at the time it was formed, on whether it would be grow into the role of a regulator of the existing regulators, something the Reserve Bank of India, for one, has been wary about. “The issue is whether there could be a super regulator to oversee and co-ordinate the other regulators,” Financial Sector Legislative Reforms Commission chairman B N Srikrishna had told Business Standard. The FSDC was constituted through a notification by the finance ministry, not by an act of Parliament. Its aims include inter-regulatory coordination and maintaining stability in the system, among other things. Its creation came as a turf war occurred between the regulators of the capital markets and the insurance sector on the policing of unit-linked insurance products. The RBI had said FSDC should not assume the role of a super regulator, but confine itself to financial literacy and financial inclusion, which are also the aims of the council. It had also expressed reservations over a proposed joint mechanism under the ministry to sort out a turf war between regulators. Later, the RBI governor was appointed as the vice-chairman of the joint mechanism, chaired by the finance minister. However, no such post was given to the RBI governor in FSDC, but he was made head of a sub-committee on the coordination of inter-regulators. Experts say RBI’s opposition to FSDC as a super regulator was probably because its prime role at the High Level Coordination Committee (HLCC) that had regulated the financial sector. RBI feared those would be diminished once FSDC came into being, as the latter was chaired by the finance minister. The sub-committee, chaired by RBI within FSDC had replaced HLCC.