Reforms top FSDC meet's agenda

FSDC is chaired by the finance minister and the members are the financial sector regulators, including RBI and Sebi

The Financial Stability & Development Council (FSDC) will meet on Saturday under new Chairman Arun Jaitley, the finance minister in the Narendra Modi-led National Democratic Allinace (NDA) government. This will also be Jaitley’s first interaction with all financial sector regulators, after taking charge as the country’s finance minister.

FSDC is chaired by the finance minister and the members are the financial sector regulators, including the governor of Reserve Bank of India (RBI) and the chairman of Securities and Exchange Board of India (Sebi).

Sources indicate one of the top priorities for the policymakers is to push financial sector reforms, particularly in the banking sector.

The P J Nayak committee report on governance in public sector banks suggested a phased framework for structural changes in the industry. It has also suggested that the government should cut its stake below 51 per cent in state-run banks. The committee said the existing laws such as the Nationalisation Act and SBI Act should be repealed. A bank should be governed by the Companies Act and the government should transfer all its stake and powers to a new entity — bank investment company (BIC).

Previous interactions of the FSDC sub-committee, which is chaired by the RBI governor, also discussed the governance issues relating to public sector banks. Other issues discussed included appointment of a chairman, selection of board members, accountability structure with regard to committee approach of decision making. Splitting of the chairman and managing director’s post in public sector banks was also discussed.

Sources said some of the recommendations of the Financial Sector Legislative Reform Commission, which do not need legislative change, will also be discussed in the FSDC meet.

RBI had said it will come out with consolidated instructions, relating to consumer services in the financial sector. The central bank had formed a committee to study FSLRC recommendations on skills and capacity development in banks and non-banks.

The Commission, headed by former Justice B N Srikrishna, had presented its report to the government in March last year and suggested merging financial sector regulators such as SEBI and IRDA into a Unified Financial Agency (UFA) and restricting the role of RBI to regulating banks and managing monetary policy.