Minister of Foreign Affairs Arun Jaitley addresses liquidity issues. RBI ensures an adequate flow of funds into the system

NEW DELHI: Finance Minister Arun Jaitley held a high-level meeting on Tuesday with financial regulators and discussed the issue of interest rates and the liquidity of non-bank financial corporations.

The Financial Stability and Development Council (FSDC), led by the Minister of Finance, decided that regulators and the government would closely monitor the situation and take all necessary measures.

At its 19th meeting, the FSDC, consisting of the Governor of the Reserve Bank, the President of the Sebi and other Regulators, such as the PFRDA, IRDAI and the President of the Insolvency and Bankruptcy Council (IBBI), examined the global and national economic situation. and financial sector performance.

The board discussed at length the problem of the real interest rate and the current liquidity situation, including the sectoral liquidity position in the NBFCs and the mutual fund space , said an official statement.

Reserve Bank Governor Urjit Patel noted that the liquidity problem in transition societies at NBFC was not as severe as expected, but badured the government that it would guarantee adequate liquidity in the system, sources said after the meeting.

The meeting takes on its importance as the FSDC meets for the first time after RBI deputy governor Viral Acharya raised the issue of the independence of the central bank.

Unlike the past, the four deputy governors of the RBI attended Tuesday's FSDC meeting with Patel.

Sources said that the governor of the RBI had informed the government that there was no liquidity crisis in the system, with the exception of certain sectors, and badured of closely monitor the financial sector.

On his side, the government asked the RBI to prevent the spread of the crisis of the IT & FS to other sectors of the economy, added the same sources.

Among other things, the issue of strengthening cyber security in the financial markets was also debated. The board also took note of the progress made in setting up a financial emergency response team in the financial sector (CERT-Fin) in the statutory framework.

The meeting also discussed the need to identify and secure critical information infrastructures in the financial sector, he said.

He also discussed the problems and challenges posed by cryptographic / currency badets and was informed of the deliberations of the High Level Committee chaired by the Secretary (Economic Affairs) with a view to defining an appropriate legal framework for banning Use of private cryptographic currencies in India. and encourage the use of distributed ledger technology, as announced in the 2018-2019 budget, the statement said.

"Other issues discussed include market developments and the financial stability implications of the use of RegTech and SupTech by financial companies and regulators and supervisors, as well as implementing the recommendations of the Sumit Bose Committee report on measures such as promoting an appropriate disclosure regime for financial distribution costs, "he added.

The meeting was attended by top government officials – Secretary Hasmukh Adhia, Secretary of Economic Affairs SC Garg, Secretary of Financial Services Rajiv Kumar and Secretary of General Affairs Injeti Srinivas took note of the activities undertaken by the FSDC sub-committee chaired by RBI. Governor and the follow-up given by members to decisions made at previous council meetings.

After the meeting, the chairman of PFRDA, the regulator of pension funds, said that there had been a general debate on the national and global economy.

The FSDC was created to strengthen and institutionalize the mechanism to maintain financial stability, improve coordination between regulations and promote financial sector development.

In May, the government, through a notice in the gazette, had included the secretary of the Ministry of Electronics and Information Technology (FSDC) within the FSDC , given the increased attention that the government gave to the digital economy.

The series of loan defaults by IL & FS has raised doubts about the financial soundness of non-bank financing companies. Last month, the government took over the board of IL & FS and appointed the senior banker Uday Kotak to the helm to resolve the crisis facing the NBFC.

According to sources, the meeting did not discuss the differences between RBI and the Ministry of Finance in several respects.

In a speech on Friday, Acharya said that compromising the independence of the central bank could be "potentially catastrophic".

He also called for strengthening of the RBI's powers to regulate the banking system in public sector banks, saying that the central bank's independence was necessary to ensure greater financial and economic stability. macroeconomic.

Council was unable to address the issue of the NPA, which was part of the agenda due to lack of time, added sources.