The Committee on Financial Sector Assessment (CFSA), a high-level panel that looked into the various aspects of India's financial sector, has submitted its report to finance minister Pranab Mukherjee, on Wednesady.

The report has been compiled by a panel headed by Rakesh Mohan, deputy governor of the Reserve Bank of India (RBI), and co-chaired by Ashok Chawla, finance secretary of economic affairs.

The report, in six volumes, revolves around the premise that resilience and stability in the domestic financial system are essential to a country's macroeconomic stability, particularly in an increasingly integrated world.

The report draws hugely from an earlier Financial Sector Assessment Programme (FSAP), jointly initiated by the International Monetary Fund (IMF) and the World Bank in 1999, partly in response to the Asian crisis of the late 1990s. The Fund-Bank report specifically looks at countries' financial sectors, assessing strengths and vulnerabilities, in order to reduce the chances of crisis.

''The resilience and stability of the domestic financial system is essential to a country's own macroeconomic stability, particularly in an increasingly integrated world. financial stability is important to the achievement of development goals as well,'' the report said.

''The FSAP, jointly initiated by the International Monetary Fund (IMF) and the World Bank in 1999, partly in response to the Asian crisis of the late 1990s, specifically looks at countries' financial sectors, assessing strengths and vulnerabilities in order to reduce the potential for crisis. It is a comprehensive health check-up of a country's financial system,'' it said.

The FSAP is now an important component of the multilateral surveillance of the IMF and the World Bank and since then, nearly three quarters of IMF member countries have undertaken or agreed to undertake the FSAP exercise.

Resilient, well-regulated financial systems are essential for macroeconomic and financial stability in a world of increased capital flows. The FSAP aims to increase the effectiveness of efforts to promote the soundness of financial sytems in member countries.

In September 2005, the IMF and the World Bank jointly published a comprehensive handbook on financial sector assessment. The handbook presents an overall analytical framework for assessing financial system stability and development and is intended to serve as a guide for financial sector assessments.

Supported by experts from a range of national agencies and standard-setting bodies, work under the programme seeks to identify the strengths and vulnerabilities of a country's financial system; to determine how key sources of risk are being managed; to ascertain the sector's developmental and technical assistance needs; and to help prioritise policy responses. Detailed assessments of observance of relevant financial sector standards and codes, which give rise to reports on observance of standards and codes (ROSCs) as a by-product, are a key component of the FSAP.

The FSAP also forms the basis of Financial System Stability Assessments (FSSAs), in which IMF staff address issues of relevance to IMF surveillance, including risks to macroeconomic stability stemming from the financial sector and the capacity of the sector to absorb macroeconomic shocks.

India was among the first to undertake the pilot FSAP in 2000-01. In addition, India also undertook a comprehensive self-assessment of international financial standards and codes during 2002 and undertook a review in 2005.

Triggered by the Fund-Bank publication and building upon its own past experience in FSAP and self-assessments as well as to ensure compatibility with international standards, the Government of India and the Reserve Bank established a Committee on Financial Sector Assessment (CFSA) in September 2006 to undertake a comprehensive self-assessment of the Indian financial sector with a medium-term perspective. 

The CFSA formed four independent advisory panels consisting of non-official experts to assist in this process, and ensure an impartial analysis and assessment. The assessment reports of the advisory panels were then peer reviewed by reputed international experts, whose knowledge and judgement provide further enhancement of the impartiality of the self assessment.

The overview report, which draws upon the inputs provided by the advisory panel reports, as well as all four advisory panel reports are being published.

The report is in six volumes:
Volume I is an executive summary of the assessments and recommendations by the CFSA. The main overview report provides the views of the CFSA, taking into account the advisory panel reports (volume II). Volumes III and VI contain the reports of the four advisory panels, covering financial stability assessment and stress testing.
 
Financial regulation and supervision, covering banking regulation and supervision, securities market regulation and insurance regulation standards (Volume IV).
 
Institutions and market structure, covering standards regarding accounting and auditing, corporate governance, payment and settlement systems and effective insolvency and creditor rights systems (Volume V), while Transparency Standards, covering standards regarding monetary and financial policies, fiscal transparency and data dissemination issues (Volume VI).  The report will be released to the public on the Reserve Bank and Government of India websites at 5.00 PM on 30 March 2009.