RBI to keep leash on banks
The Reserve Bank of India (RBI) may not ease its regulatory powers in the wake of Raghuram Rajan Committee’s recommendations on the ‘Next Generation Reforms for Indian Financial Sector’ mooting statutory status for some kind of a ‘super regulatory’ body, while reforming the country’s 'Regulatory Architecture’.
Indicating the RBI’s mind on this key issue, RBI Department of Economic Analysis & Policy Director D P Rath said that though the Rajan panel has recommended making ‘High Level Coordinating Committee (HLCC)’ — of all regulatory agencies including Sebi “nothing has been finalised.”
However, “we (in the Central Bank) say that RBI must remain the Regulator of the Banking system,” in the context of attaining the objectives of financial stability, Rath said this evening, making a presentation at the RBI Staff College here on “The Report on Trend and Progress of Banking in India 2008-09”.
In the backdrop of the global financial crisis last year and its continuing impact, he said that achieving overall financial stability “will be a challenge”. But the Indian banking system has not been hit by a crisis yet.
The key issue here is to maintain the trade-off between the rate of economic growth and financial stability, he said. Stating that worldwide, the Banking sector’s growth was much higher than the GDP growth rate, Rath added India, nonetheless, faced no crisis on account of this trend.
