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Inflation should be kept low, reforms required for growth: RBI

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RBI Governor Raghuram Rajan
RBI Governor Raghuram Rajan credit: www.thehindu,com

By NewsGram Staff Writer

Mumbai: Reserve Bank of India (RBI) Governor Raghuram Rajan on Friday said inflation should be kept low not only now but also in the future, adding that reforms are needed for sustainable growth.

Rajan, at an event in Mumbai said that keeping inflation down and implementing reforms are needed for maintaining sustainable growth.

There are expectations that the RBI would reduce interest rates at its next monetary policy review later this month.

This has been reinforced with the US Federal Reserve deciding to hold its interest rates much against the earlier expectation they would be hiked.

On the US Federal Reserve’s decision, Rajan said this could be due to concerns about the American economy. He said the US may be waiting for more information before deciding on a rate hike.

Rajan also said the banks should quickly balance their books, adding there was need for a bankruptcy code to enable the lenders better handle their loan accounts.

With Inputs from IANS

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RBI Working With Regulators For Better Security Lending Products, Says DG

The Reserve Bank of India (RBI) is currently working with other financial sector regulators like Sebi, PFRDA and Irda to develop an interest rate market

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RBI, security, finance, market
This is broken as Rs 1,23,414 crore as surplus for year 2018-19 and another Rs 52,637 crore of excess provisions identified by the committee as per the revised Economic Capital Framework. Pixabay

The Reserve Bank of India (RBI) is currently working with other financial sector regulators like Sebi, PFRDA and Irda to develop an interest rate market where mutual funds, pension and insurance funds could participate in securities lending to deepen market based finance and develop an alternate to bank finance.

“IRDA, SEBI and PFRDA too could help development of interest rate markets. For instance, short selling activity could benefit if a wider pool of securities lenders can be developed.

“Insurance and pension funds, mutual funds have significant holdings of Government securities that could be used to lent to short sellers. This would avoid short-squeeze incident we saw a couple of years back, apart from generating income for these entities.

“We are working with regulators to develop a securities lending product that could enable these entities to participate in securities lending,” B.P. Kanungo, Deputy Governor, Reserve Bank of India recently said at FIMMDA meeting in Moscow.

RBI, finance, security, market
Reserve Bank of India’s regional office at South Gandhi Maidan Marg, Patna. Wikimedia Commons

FIMMDA is a representative body of participants in the fixed income market in India.

He said the Indian financial sector which mostly has been a bank-based one needs to develop a robust fixed income market to bring in market discipline, to augment bank finance and indeed free up bank finance for uses that cannot access the market directly.

Development of the fixed income market has been an important objective of the Reserve Bank, the Government, the SEBI and other regulators these many years. Significant progress has been made, yet a lot remains to be achieved.

The Banking regulator is also currently looking at refurbishing some regulations on treatment of cash margins as deposits, payment of interest on such margins, posting of collateral abroad to enable participants to move to global margining standards.

“The risk management at market level is pretty robust, with central counterparty settlement, exchange traded products, trade repositories, legal entity identifier.

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But there is scope of improvement at entity-level as far as financial institutions are concerned, which will be tested with introduction of new accounting standards. Some other aspects of regulation – treatment of cash margins as deposits, payment of interest on such margins, posting of collateral abroad – are all under examination to enable participants to move to global margining standards.

Kanungo further said in the next five years the demand for bonds will significantly outstrip the supply.

“It is estimated that five years down the line, the demand for bonds will significantly outstrip the supply,” he said. (IANS)