India says banking system sheltered from wider sector turmoil
"We see that the global financial situation is daunting but, at the same time, Indian economy and financial sector is well protected and well regulated. But of course we have to be cautious and be on our toes," Ajay Seth said.
Finance Minister Nirmala Sitharaman has asked regulators to see financial sector stability as a shared responsibility. Speaking at the 27th meeting of the Financial Stability and Development Council (FSDC), Sitharaman said that regulators must take appropriate, and timely action to mitigate any vulnerability and strengthen financial stability.
India’s Financial Stability and Development Council (FSDC) considers the country’s banking system to be protected from any spillover from issues in the sector globally, the country’s Economic Affairs Secretary, Ajay Sethsaid on Monday.
It was deliberated that regulators should conduct a special drive to facilitate the settlement of unclaimed deposits and claims in the financial sector across all segments, such as banking deposits, shares and dividends, mutual funds, insurance, etc.
In a time-bound manner, that activity should be taken but where the nominee details are not there, the process has to be put in place
The council discussed a number of issues starting with the issue of financial stability, noting that there are daunting challenges coming from the global economy.
“It was noted that maintaining financial stability, being on our toes, and maintaining financial stability is a shared responsibility and all the members will be working towards that,” Seth said.
Regulators should adopt a focused approach to reduce the compliance burden further and ensure a streamlined and efficient regulatory environment, he said, adding the progress achieved in this regard will be reviewed by the Union Finance Minister with each regulator in June 2023.
The regulators need to be proactive and ensure cybersecurity preparedness of the information technology systems to reduce the risk of cyberattacks, protect sensitive, financial data and maintain overall system integrity, thus safeguarding the stability and resilience of the Indian financial ecosystem, he said.
Asked whether the council, which was the first FSDC meeting since the 2023/24 Federal Budget was announced on Feb. 1, discussed India’s exposure to the Western financial system, he said it was not specifically discussed.
However, whether spillover can occur and the channels of potential risks were debated.
Seth also said there is no spillover effect of the failure of American banks on the Indian financial system, which is "well protected".
Apart from that government is also pretty much clear that there are daunting challenges from the global economy, but at least for now, India's financial system is well protected.
-With agency inputs
First Published: May 8, 2023 6:54 PM IST
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