Finance Minister to Evaluate Economic Challenges and C-KYC Issues at FSDC Meeting
FSDC to Hold Meeting on June 10 to Evaluate Macroeconomic Stability and Enhance Financial Coordination
On June 10, the Financial Stability and Development Council (FSDC), led by Finance Minister Nirmala Sitharaman, will convene to examine macroeconomic stability amid global uncertainties. The meeting aims to simplify and digitize the Centralized Know Your Customer (CKYC) process in the financial sector while also addressing issues of regulatory coordination.
This gathering, set to take place in Mumbai, will bring together senior policymakers and regulatory authorities to discuss strengthening cooperation among financial regulators to foster inclusive economic growth. Reports suggest that the FSDC will stress the importance of vigilance and take proactive measures to identify emerging risks to financial stability given the prevailing domestic and global macro-financial landscape.
Review of Financial Sector Reforms and Regulatory Impact
In her FY26 Budget address, Sitharaman indicated plans to introduce a mechanism for assessing the effects of current financial regulations and ancillary instructions. This initiative aims to develop a framework that enhances the adaptability and growth of the financial sector.
The finance ministry, in collaboration with financial sector regulators such as the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI), is coordinating this essential CKYC endeavor, which seeks to streamline verification and customer onboarding processes across the financial landscape in India.
Economic Growth Slows Down, Impact on Financial Measures Likely
India’s economic growth recorded a decline to 7.4% in the fourth quarter of 2024-25, down from 8.4% in the same quarter of the previous year, attributed to a slump in manufacturing, government and private consumption, along with key services, as per provisional figures released by the National Statistics Office (NSO). Overall, GDP growth for FY25 dropped to a four-year low of 6.5%, in contrast to 9.2% from the preceding year.
The FSDC is expected to evaluate previously approved measures aimed at advancing the financial sector and ensuring macroeconomic stability alongside inclusive economic growth. There will also be an overview of activities carried out by the FSDC sub-committee, which is chaired by the RBI governor, including updates on resolutions made in prior meetings.
Balancing Regulation with Innovation in the Financial Sector
The upcoming meeting occurs against the backdrop of a growing consensus in certain circles that financial regulators must achieve a delicate balance. They should fulfill their mandated roles without stifling innovation and growth within the sector. Chief Economic Adviser Anantha Nageswaran has urged regulators to increase transparency regarding the rationale behind their regulatory decisions and to remain mindful of the limitations of their “unelected power.” He emphasized the necessity for regulators to communicate clearly why specific regulations are instituted, the data that informs them, their expected outcomes, and the criteria for repealing any measures.
Finance Ministry’s Recommendations for Small Borrowers
To ease potential challenges for small borrowers, the finance ministry proposed to the RBI on May 30 to exempt borrowers with loans up to Rs 2 lakh from the tighter guidelines regarding gold loans and to implement these new standards starting January 1, 2026. The meeting will also include key figures such as the RBI governor, along with leaders from SEBI, the Insurance Regulatory and Development Authority of India, the Pension Fund Regulatory and Development Authority, the International Financial Services Centres Authority, and other financial sector regulators.
