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Q56 (IAS/2016) Economy › Economy Current Affairs › Banking sector reforms Official Key

With reference to Financial Stability and Development Council', consider the following statements : 1. It is an organ of NITI Aayog. 2. It is headed by the Union Finance Minister. 3. It monitors macroprudential supervision of the economy. Which of the statements given above is/are correct?

Result
Your answer: —  ·  Correct: C
Explanation

The correct answer is option C (statements 2 and 3 only).

The Financial Stability and Development Council (FSDC) was set up by the Government of India as the apex-level forum in December 2010[2], making statement 1 incorrect – it is **not** an organ of NITI Aayog but an independent body established by the government.

The Chairperson of the FSDC is the Finance Minister of India[3], confirming that statement 2 is correct.

FSDC deals with issues relating to macroprudential supervision of the economy including the functioning of large financial conglomerates[4], which validates statement 3 as correct.

The Council's members include the heads of financial sector Regulators (RBI, SEBI, PFRDA, IRDA), Chairperson of IBBI, Chief Economic Advisor and secretaries from relevant ministries[2], emphasizing its role as an inter-regulatory coordination body focused on financial stability rather than being part of NITI Aayog's structure. Therefore, only statements 2 and 3 are correct.

Sources
  1. [1] https://www.indiabudget.gov.in/budget2016-2017/es2015-16/echapter-vol2.pdf
  2. [2] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 3: Money and Banking - Part II > 3.4 Financial Stability and Development Council (FSDC) > p. 133
  3. [3] https://dea.gov.in/files/annual_reports_documents/Annual_Report_English.pdf
  4. [4] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 3: Money and Banking - Part II > 3.4 Financial Stability and Development Council (FSDC) > p. 133
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Don’t just practise – reverse-engineer the question. This panel shows where this PYQ came from (books / web), how the examiner broke it into hidden statements, and which nearby micro-concepts you were supposed to learn from it. Treat it like an autopsy of the question: what might have triggered it, which exact lines in the book matter, and what linked ideas you should carry forward to future questions.
Q. With reference to Financial Stability and Development Council', consider the following statements : 1. It is an organ of NITI Aayog. 2. I…
At a glance
Origin: Books + Current Affairs Fairness: Moderate fairness Books / CA: 6.7/10 · 3.3/10
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This is a classic 'Institutional Architecture' question. The examiner tests your clarity on the parentage and leadership of major bodies. The trap in Statement 1 (linking FSDC to NITI Aayog) is a standard 'Wrong Parent' swap. If you know the Chairman is the Finance Minister, the link to NITI Aayog (chaired by PM) breaks immediately.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

Statement 1
Is the Financial Stability and Development Council (FSDC) an organ of NITI Aayog?
Origin: Web / Current Affairs Fairness: CA heavy Web-answerable

Web source
Presence: 5/5
"Financial Stability and Development Council (FSDC) under the chairmanship of union Finance Minister was set up by the government as the apex-level forum in December 2010."
Why this source?
  • Explicitly states FSDC was set up by the Government of India as an apex-level forum.
  • Says FSDC is under the chairmanship of the Union Finance Minister, indicating it is part of the finance/government apparatus, not NITI Aayog.
Web source
Presence: 5/5
"The Chairperson of the FSDC is the Finance Minister of India, and Members include Ministers of State for Finance, the heads of the financial sector regulators and Secretaries of the relevant Ministries/Departments of the Government of India."
Why this source?
  • Identifies the Finance Minister as the Chairperson of the FSDC.
  • Lists members as Ministers, heads of financial regulators and Secretaries of relevant Ministries — showing FSDC is a government/regulatory forum, not an organ of NITI Aayog.
Web source
Presence: 4/5
"FSDC Secretariat provides secretarial assistance to Financial Stability and Development Council (FSDC), which has Additional Secretary, Department of Economic Affairs, Ministry of Finance as the Secretary of the Council"
Why this source?
  • States the FSDC Secretariat is provided by the Department of Economic Affairs, Ministry of Finance.
  • Names the Additional Secretary, Department of Economic Affairs as Secretary of the Council, reinforcing that FSDC is anchored in the Finance Ministry.

Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 3: Money and Banking - Part II > 3.4 Financial Stability and Development Council (FSDC) > p. 133
Strength: 5/5
“With a view to strengthening and institutionalizing the mechanism for maintaining financial stability, enhancing inter-regulatory coordination and promoting financial sector development, the Financial Stability and Development Council (FSDC) was set up by the Government of India as the apex level forum in December 2010. FSDC is not a statutory body and was set up through a gazette notification. The Chairman of the Council is the finance minister and its members include the heads of financial sector Regulators (RBI, SEBI, PFRDA, IRDA), Chairperson of Insolvency and Bankruptcy Board of India (IBBI), Chief Economic Advisor and secretaries from ministry of finance, ministry of Information Technology and ministry of Corporate Affairs.”
Why relevant

Describes FSDC as an apex forum set up by the Government (gazette notification), non-statutory, chaired by the Finance Minister with members from financial regulators and finance/IT/Corporate Affairs secretaries.

How to extend

A student could use this to note the FSDC's origin, leadership and membership and compare them with NITI Aayog's leadership/membership to see if FSDC is organised under NITI or is a separate executive forum.

Indian Polity, M. Laxmikanth(7th ed.) > Chapter 56: NITI Aayog > ESTABLISHMENT > p. 465
Strength: 4/5
“t ESTABLISHMENT On the 13th of August, 2014, the Modi Government scrapped the 65-year-old Planning Commission and announced that it would he replaced by a new body. Accordingly, on January 1, 2015, the NfTI Aayog (National Institution for Development Promotion in India) was established as the successor to the planning commission. However, it must be noted here that the NITI Aayog, like that of the Planning Commission, was also created by an executive resolution of the Government of India (Le., Union Cabinet). Hence, it is also neither a constitutional body nor a statutory body. In other words, it is a non-constitutional or extra-constitutional body (Le., not created by the Constitution) and a non-statutory body (not created by an Act of the Parliament).”
Why relevant

Explains NITI Aayog's establishment (executive resolution) and that it is a non-constitutional, non-statutory body, created as successor to the Planning Commission.

How to extend

One can combine this with FSDC's creation method to check whether FSDC was created as part of NITI (same resolution) or separately by a different notification.

Indian Polity, M. Laxmikanth(7th ed.) > Chapter 56: NITI Aayog > AUTONOMOUS AND ATTACHED BODIES > p. 470
Strength: 4/5
“t AUTONOMOUS AND ATTACHED BODIES The NITI Aayog is supported by a n autonomous body i.e., the National Institute of Labor Economics Research and Development, and an attached office i.e., the Development Monitoring and Evaluation Organisation. These are explained below: I. National Institute of Labour Economics Research and Development The National Institute of Labour Economics Research and Development (NI LERD) was formerly known as the Institute of Applied Manpower Research (IAMR). It is a central autonomous organization under the NITI Aayog. Its primary objectives are research, data collection, education and training in all aspects of human capital planning, human resource development, and monitoring and evaluation.”
Why relevant

Lists that NITI Aayog has explicitly named an attached office and an autonomous body (NI LERD and DMEO), showing NITI's practice of formally listing its subordinate/attached organisations.

How to extend

A student could look for FSDC in similar lists (or absence from them) to infer whether FSDC is formally an organ/attached body of NITI Aayog.

Indian Economy, Nitin Singhania .(ed 2nd 2021-22) > Chapter 6: Economic Planning in India > NITI AAYOG > p. 143
Strength: 3/5
“• National Institution for Transforming India (NITI) Aayog was set up on 1 January 2015, replacing the 65-year-old Planning Commission. NITI Aayog seeks to provide a critical, directional and strategic input into the developmental process of the country.• Like the Planning Commission, it is a non-constitutional and non-statutory body. \bullet• It is a policy think tank established to provide strategic and technical advice to the Central Government.”
Why relevant

States NITI Aayog is a policy think-tank, non-statutory, that provides strategic/technical advice to the Central Government (describes its functional character).

How to extend

Using this, one could ask whether FSDC's described role (financial stability forum with regulator heads) fits within a typical advisory think-tank organ or is a separate inter-regulatory council, suggesting organisational independence.

Indian Polity, M. Laxmikanth(7th ed.) > Chapter 56: NITI Aayog > FUNCTIONS > p. 468
Strength: 3/5
“state-of-the-art resource centre, a repository of research on good governance and best practices, provides advice and encourages partnerships with key stakeholders, including colleges, universities, think tanks and non-governmental organizations at home and abroad.¹ The various functions performed by the NITI Aayog can be divided into four main heads: • 1. Policy and programme framework • 2. Co-operative and competitive federalism • 3. Monitoring and evaluation • 4. Think-tank, Knowledge and Innovation Hub The NITI Aayog is functionally divided into various verticals/cells, which are responsible for examining and looking into sectoral issues and priorities for national development and economic growth. The different verticals/cells of NITI Aayog provide the requisite co-ordination and support framework for NITI Aayog to carry out its mandate.”
Why relevant

Summarises NITI Aayog functions and internal structure (verticals/cells for sectoral issues), implying that bodies under NITI are organised as specific verticals, attached offices or autonomous bodies.

How to extend

A student could check whether FSDC is described as one of NITI's verticals/cells or attached bodies; absence would be evidence against FSDC being an organ of NITI.

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Statement analysis

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