The Financial Stability and Development Council (FSDC) will not be a statutory body. Finance minister Pranab Mukherjee proposed formation of this council as an apex body to foster financial stability and to sort out inter-regulatory coordination issues.

?Currently, it (FSDC) is not likely to be a statutory body. The statute will take time and we are not even sure statute is needed. And the very fact we don?t have intentions of a statute should presumably indicate that the FSDC doesn?t intend to exercise any powers,? said KP Krishnan, joint secretary in the department of economic affairs of the finance ministry.

FSDC is likely to monitor activities of large financial conglomerates by assigning them to lead regulators. For instance, a financial conglomerate deriving majority of its revenues from banking activities could be regulated by the Reserve Bank of India, instead of the current practice of multiple institutions regulating the conglomerate. Similarly the insurance regulator IRDA could regulate activities of a conglomerate deriving majority revenues from insurance business.

?The Budget speech talks about large financial conglomerates because that is currently the missing element in the Indian financial sector landscape. So if you are doing activity in five sectors you are currently individually looked at by each regulator. But collectively nobody looks at you. Is that an issue, my sense is the world showed us that it can potentially be an issue,? Krishnan said on the sidelines of at a NIPFP-DEA research seminar on Wednesday.

?So FSDC may not look at it, FSDC could look at this issue and conclude that if dominant member of the group (conglomerate) is sector X, the regulator of sector X should be the lead regulator. So FSDC will not be actually doing it, this is a possibility that FSDC will now decide when we write the discussion paper,? he added. The RBI has identified 12 financial conglomerates operating in India.

Currently there is no legal provision in the Indian financial laws or the RBI Act to specifically target regulation of financial conglomerates and holding companies. The financial conglomerates cell in the Department of Supervision of the RBI will provide inputs to the council.

Krishnan said the FSDC will be an apex level body but not a super regulator.