FSDC meet to chalk out worst case scenarios,possible action points

When the financial regulators of the country meet later this week,the review of developments involving the rupee,which has fallen around 19% since August this year,is likely to top the agenda. In fact,the regulators will also discuss the worst case scenario of the crisis and how best to manage them,through what they call as ‘scenario management’. A sub-committee of the financial stability development council (FSDC) is meeting on December 8 “to review the development in rupee and assessment of external commercial borrowing,and stability in all markets...financial stability report prepared by the Reserve Bank of India will also be discussed,” official sources told The Indian Express. The rupee has depreciated around 19% since August and closed at 51.41 per dollar on Monday. A weak rupee increases the import bill of a country and impacts the foreign exchange reserves. India is planning to “put in place a crisis management group”,the official said adding that the group will focus on several “plausible but not probable” situations of crisis. “We are creating extreme scenarios and strengthening capacity to fight in case of any eventuality,” the official said. The group is likely to have the deputy governor of the Reserve Bank of India (RBI) as chairman with representation from regulators including Insurance Regulatory and Development Authority (Irda),the Securities and Exchange Board of India (Sebi),the finance ministry and the Pension Fund Regulatory and Development Authority (PFRDA). The FSDC was set up by the government in the wake of the global financial crisis in 2008-09 and is aimed at better coordination between financial sector regulators to ensure macro-economic stability. It consists of the four financial sector regulators and is chaired by finance minister Pranab Mukherjee. The council is meeting in Kolkata. The other issue the FSDC sub-committee would focus on is financial inclusion and literacy. The official said that the country needs to go beyond banking for financial inclusion. “We want inclusion beyond banking,for example,penetration of mutual funds,opening of demat accounts. In an institutional way we are moving forward towards this kind of financial inclusion,” the official added. The government had set up two technical groups for this – one has suggested inclusion of financial literacy as a part of school syllabus. In fact,the National Council of Educational Research and Training has already formed a committee to include financial literacy as a part of the course. The data collection for financial inclusion has also started. A national strategy on this is also being worked out,the official said.