Need to monitor geopolitical frictions closely, ensure resilience, says sub-panel on financial stability

A sub-committee under the Financial Stability and Development Council (FSDC) today said there is a need to keep a close watch on the emerging challenges due to geopolitical frictions and ensuring financial sector resilience.

The FSDC Sub Committee, chaired by Reserve Bank of India Governor Sanjay Malhotra, deliberated on the impact of the ongoing West Asia crisis and its impact on the domestic macro-economic situation. The committee also reviewed some regulatory progress.

“A meeting of the Sub-Committee of the Financial Stability and Development Council (FSDC-SC) was held today at the Reserve Bank of India, Mumbai. Shri Sanjay Malhotra, Governor, Reserve Bank of India, chaired the meeting,” said a release from the RBI.

What did the panel say on geopolitical frictions?

“The Sub-Committee deliberated on key global and domestic macroeconomic and financial sector developments, along with emerging issues bearing implications for financial stability. The FSDC-SC reaffirmed its commitment to enhancing financial sector resilience through inter-regulatory coordination; and keeping a close watch on emerging challenges including those from heightened geopolitical frictions,” it added.

“It also reviewed the progress in several inter-regulatory matters including simplification of KYC processes and regulatory impact assessment, with an emphasis on enhancing the quality, transparency and accountability of regulatory processes,” the release said.

The meeting was attended by the members of the Sub-Committee - Tuhin Kanta Pandey, chairperson, Securities and Exchange Board of India (SEBI); Ajay Seth, chairperson, Insurance Regulatory and Development Authority of India (IRDAI), S Ramann, chairperson, Pension Fund Regulatory and Development Authority (PFRDA), K. Rajaraman, chairperson, International Financial Services Centres Authority (IFSCA), and S. Krishnan, secretary, Ministry of Electronics and Information Technology (MeitY), among others.

V Vualnam, secretary, department of expenditure, and Chief Economic Adviser V. Anantha Nageswaran were also present in the meeting.

It may be noted that Nageswaran on Tuesday said the crisis in the Middle East has emerged as a “live stress test“ for balance of payment rather than a temporary shock, and management of the current account and currency are the key imperatives for FY27.

“The crisis in West Asia has emerged as a live balance of payment stress test with implications for inflation, current account deficit and rupee. Managing current account credibly, financing it and improving further currency depreciation are the central macroeconomic imperatives of FY27,” Nageswaran said at the CII Annual Business Summit yesterday.