Chennai: India’s exposure to cash-strapped Greece was very limited and the central government was in talks with the central bank on providing additional capital to public sector banks, a top Reserve Bank of India (RBI) official said on Thursday.
RBI Governor Raghuram Rajan said capital investments in the Indian economy were picking up while reforms were needed for stronger growth.
Speaking to reporters after attending RBI’s board meeting here, Rajan said the country has very limited exposure to Greece that was facing a crisis after defaulting on payments to the International Monetary Fund and would not be impacted much directly. However, the develop ments may have a slight indirect effect, he conceded.
He said the Greece issue may impact the exchange rates. Untoward developments in that country could also place at risk global investments, he warned.
Rajan said global investors after analysis would find the India story to be very good. India’s macro policies were good while the growth prospects and foreign exchange reserves were healthy, he pointed out.
Rajan said India was attractive for foreign investors given the opportunities while the global economy is on the road to recovery.
According to Rajan, the Indian economy was picking up as there were signs of capital investment picking up while the government has to address some issues to put on track the stalled infrastructure projects.
However, he cautioned against relying on foreign investors to fund government or corporate banks market.
Queried about inflation, the RBI governor said it was being watched as well as the progress of the monsoon.
On the issue of non-performing assets of banks, Rajan said RBI was working with the banks so that they recognise the issue early.
He said additional capital infusion by the government into public sector banks will also provide the necessary buffer for the latter.
Rajan said the process of appointing new heads for public sector banks will be completed soon.
According to him, exports was an area of relative weakness which was true across different Asian economies.
Rajan also announced that RBI will put in place a regulatory framework to allow a new kind of Non-Banking Finance Company (NBFC), which could act as an account aggregator to enable the common man to see all his accounts across financial institutions in a common format.
The idea of such an NBFC had emanated from the Financial Stability and Development Council (FSDC).
RBI deputy governor S.S. Mundra said the central bank proposes to recommence the Financial Inclusion Advisory Committee (FIAC) to take the financial inclusion agenda forward.
Mundra said the work on financial inclusion was far from complete and a road map needed to be laid out to take the agenda forward, as Prime Minister Narendra Modi indicated at RBI’s 80th Anniversary celebrations.
This has also assumed critical importance following the massive efforts made for opening of bank accounts under the Prime Minister’s Jan Dhan Yojana with focus on Jan Dhan accounts, Aadhar identity and Mobile phones.
According to Mundra, RBI would request all financial sector regulators as also the government, self-regulatory organisations, research organisations, Unique Identification Authority of India (UIDAI), National Payments Corporation of India (NPCI) and such other stake holders for nomination to FIAC.
He said that as an input to the FIAC, RBI will set up an internal group with the concerned departments to prepare a blue print for financial inclusion for the next five to 10 years identifying ways to integrate resources available with all financial institutions in achieving the goals for financial inclusion.
Harun R. Khan, another RBI deputy governor, highlighted the measures being taken to move towards less-cash less-paper-based payment system, with focus on creating more acceptance infrastructure for the huge number of plastic cards issued by banks and upscaling mobile banking.
The RBI’s board meeting also discussed the draft Annual Report for 2014-15.
The Annual Report of RBI gives an account of what was planned in the past year, what was achieved and what was not, as also what the central bank proposed to do in the coming year.