Financial Stability Development Council to discuss interest rates,US rating loss

MUMBAI: The sub-committee of the Financial Stability Development Council (FSDC) will meet in Mumbai on Tuesday to discuss issues related to interest rates and impact of the US rating loss on Indian markets, people with knowledge of the matter said. It will be the first such get-together of the country’s financial regulators since the US lost its AAA credit rating from S&P.

On the agenda for the meet, an agency report quoted a finance ministry official: “We will discuss issues including review of financial stability, infrastructure debt funds, repo in corporate bonds, conflict of interest in distribution of financial products, financial literacy and financial inclusion by banks.”

FSDC is a high-level organisation, headed by finance minister Pranab Mukherjee, set up last year to strengthen and institutionalise the mechanism for maintaining financial stability, financial sector development and inter-regulatory co-ordination. The sub-committee of FSDC is headed by RBI governor D Subbarao.

The meeting is likely to be attended by Sebi chairman UK Sinha, Irda chairman J Hari Narayan, and PFRDA chairman Yogesh Agrawal.

Senior officials from the finance ministry, including chief economic advisor Kaushik Basu and economic affairs secretary R Gopalan are also likely to be present.

The high-level congregation comes amid global financial nervousness following the US downgrade and Europe debt problems and rising interest rates in India to fight stubborn price pressures. The central bank has aggressively tightened rates since March last year and is expected to continue its stance despite global economic uncertainty. Reacting to the lowering of rating for the US, RBI said it is expected to have a “limited impact” on India’s growth.

Headline inflation based on wholesale price index (WPI) rose to 9.44% in June from 9.10% in May, and well above the central bank’s perceived comfort level of 6-7%.