Subbarao also expressed reservations on the recommendations of the Financial Sector Legislative Reforms Commission.
Mumbai: Reserve Bank Governor D Subbarao on Wednesday said the Financial Stability and Development Council (FSDC) should act only as a coordinator between financial regulators for ensuring financial sector stability.
"There should be a coordination body such as the FSDC, but the coordination body should be just that--a coordination body which will have more importance during a crisis time -- but in normal times, will be at a low level equilibrium," the governor said.
Subbarao also expressed reservations on the recommendations of the Financial Sector Legislative Reforms Commission, which calls for making the FSDC a statutory body to ensure financial stability and have a board headed by the finance minister to oversee the same.
Under the present FSDC arrangement, the RBI governor is a chairman of a sub-committee as the overall head is the finance minister.
"In the Reserve Bank, we have some reservations about that sort of an arrangement. In particular, the concern is that the responsibility for financial stability can be given to a committee rather than to an institution," Subbarao told a banking summit organised by IMC here.
The FSLRC was headed by retired Supreme Court judge BN Srikrishna and submitted his report in March.
The report called for a total overhaul of the existing financial system by merging the oversight functions of market, commodity, insurance and pension regulators.
"By the year 2020-25, we hope to achieve USD 13-14 trillion economy. An ambition cannot be achieved unless there are steps taken towards it. Therefore, you need something that is drastic, something that is total overhaul of the existing financial system," Srikrishna had said in his report.