Financial Sector Current Affairs

IMF and WB jointly release Financial System Stability Assessment report

The International Monetary Fund (IMF) and World Bank (WB) has released the Financial System Stability Assessment (FSSA) and Financial Sector Assessment (FSA) respectively.

It was second comprehensive Financial Sector Assessment Program (FSAP) of Indian financial system undertaken by the joint IMF-World Bank team conforming to the highest international standards.

Financial System Stability Assessment (FSSA)

‎FSAP is joint program of IMF and WB involved in developing countries and region only. It undertakes a comprehensive and in-depth analysis of a country’s financial sector. ‎It is conducted every five years. Last FSAP for India was conducted in 2011-12 and the report was published by IMF in January 2013.

Highlights of 2017 FSAP

The FSAP assessment acknowledges India’s strong growth in recent years in both economic activity and financial assets. It also acknowledges many efforts undertaken by India like tackling Non-Performing Assets (NPAs), recent recapitalization measures for banks and introduction of special resolution regime, formalization of National Pension System (NPS) and making the pension sector regulator statutory.

It also acknowledged India’s efforts towards passing of Insolvency and Bankruptcy Code and setting up of Insolvency and Bankruptcy Board of India (IBBI) and initiatives such as ‘no frills’ account (under Jan DhanYojana) and introduction of unique biometric identification number (AADHAR).

It also acknowledged RBI’s substantial progress made in strengthening banking supervision by introducing of risk-based supervision in 2013 through comprehensive and forward-looking Supervisory Program for Assessment of Risk and Capital (SPARC) and Asset Quality Review (AQR) and strengthening of regulations in 2015 leading to improved distressed asset recognition.

It also acknowledged RBI’s Basel III framework and other international norms have been implemented or are being phased in. It acknowledges RBI’s move of establishing new Enforcement Department and revising Prompt Corrective Action (PCA) framework that incorporates more prudent risk-tolerance thresholds. ‎It has recommended that governance and financial operations of Public Sector Banks (PSBs) can be improved by developing strategic plan for their consolidation, divestment, and privatization.

Month: Categories: Banking Current Affairs 2018

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17th meeting of FSDC held in New Delhi

The seventeenth Meeting of the Financial Stability and Development Council (FSDC) was held in New Delhi under the Chairmanship of the Union Minister of Finance Arun Jaitley.

The meeting was attended by RBI Governor Dr. Urjit R. Patel, SEBI chairman, IRDAI Chairman along with heads and other senior officers of the Government and financial sector regulators.

Key Highlights of Meeting

Macro-economic stability: FSDC held that India has macro-economic stability on the back of improvements in its macro-economic fundamentals, structural reforms, action taken to address the Twin Balance Sheet (TBS) challenge, extraordinary financial market confidence and long-term positive consequences of demonetization.

Challenges facing the Indian economy: It also discussed the issues and challenges facing the Indian economy and members agreed on the need to keep constant vigil and be prepared of managing any external and internal vulnerabilities.

Progress of Financial Sector Assessment Program for India: It is jointly conducted by the International Monetary Fund (IMF) and the World Bank. It directed that the assessment report should be finalized by end of this calendar year.

CERT-Fin and FDMC: It took note of the developments and progress made in setting up of Computer Emergency Response Team in the Financial Sector (CERT-Fin) and Financial Data Management Centre. It also discussed measures for time bound implementation of the institution building initiative.

Central KYC Registry (CKYCR) system: It also discussed on the CKYCR system and took note of the initiatives taken in this regard by the members and discussed the issues in respect of its operationalization.

Regulation of CRAs: It also deliberated on strengthening the regulation of Credit Rating Agencies (CRAs).

About Financial Stability and Development Council (FSDC)

FSDC is super regulatory body for regulating financial sector which is a vital for bringing healthy and efficient financial system in the economy. The idea to create it was first mooted by the Raghuram Rajan Committee on Financial Sector Reforms in 2008.

The FSDC envisages to strengthen and institutionalise mechanism of (i) maintaining financial stability, (ii) Financial sector development, (iii) inter-regulatory coordination along with monitoring macro-prudential regulation of economy.

Composition of FSDC: The Union Finance Minister is its chairman. Besides, heads of the financial sector regulatory authorities (i.e, RBI, SEBI, IRDA, PFRDA), Finance Secretary and/or Secretary, Department of Economic Affairs (Union Finance Ministry), Secretary, Department of Financial Services, and Chief Economic Adviser are its members

Two Core functions: (i) Act as an apex level forum to strengthen and institutionalize the mechanism for maintaining financial stability. (ii) Enhance inter-regulatory coordination and promoting financial sector development in the country.

Other functions: (i) Focus on financial literacy and financial inclusion. (ii) Monitor macro-prudential supervision of the economy. (iii) Assess the functioning of the large financial conglomerates.

Month: Categories: India Current Affairs 2018

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