India?s financial sector regulators, including the Reserve Bank of India (RBI) and finance ministry, plan to revive the Crisis Management Group (CMG) to address systematic risks in the sector as the global economic environment worsens.
A meeting of the sub-committee of the overarching Financial Stability Development Council (FSDC), headed by RBI Governor D Subbarao , deliberated on Wednesday the need to set up such a group.
The CMG will include all the financial regulators, including the Pension Fund Regulatory and Development Authority Bill ( PFRDA), Insurance Regulatory and Development Authority’ (Irda) and Securities and Exchange Board of India (Sebi), as well as the stock exchanges. A senior finance ministry official said on condition of anonymity the structure and powers of this group would be conceptualised by the RBI governor and further discussions will be held as to how this group can handle systematic risks that could occur in the financial sector. The sub-committee of FSDC is expected to meet again on December 8 to deliberate the structure, format and mandate of this group.
CMG was formed in 2008 in response to the global financial meltdown, but the group has remained largely inactive since then. Policy makers in the finance ministry have strongly endorsed the need to have such a group, which will track instability in any of the financial sectors and flag those well in advance. Since the RBI governor-led sub-committee of FSDC does a similar work, the finance ministry has asked for more clarity on the role and powers of the planned CMG.
Sources in the finance ministry also said this group will look into issues like exposure of European banks in India. The group will look at any systematic risks prevalent in these banks operating here. Also, India’s interface to the Euro Zone, like payment issues faced by exporters, will be taken up by this group. The European Union is the second biggest trading partner to India, but the proportion of Indian exports to the EU have come down from 22% in 2004-05 to 19% in 2010-11.
The government had set up the FSDC under the chairmanship of finance minister Pranab Mukherjee to strengthen and institutionalise the mechanism for maintaining financial stability, development and inter-regulatory coordination subsuming the earlier High-level Committee on Capital Markets headed by the RBI chief.
