The Hindu Business Line : Global uncertainties have increased, says RBI Governor

(From left) Mr Rakesh Mohan, Deputy Governor, RBI ; Dr Y.V. Reddy, Governor; Mr V. Leeladhar, Deputy Governor; and Mr N.R.Narayana Murthy, Chief Mentor, Infosys Technologies,at the Central board of directors meeting of the Reserve Bank of India in Chennai on Thursday. - - Bijoy Ghosh

Chennai , July 14

THE Governor of the Reserve Bank of India, Dr Y.V. Reddy, said that global uncertainties "have increased compared to what we estimated." He said the RBI was "analysing, still looking into it" and that the central bank hoped to come out with an update on the economy soon.

Asked for the RBI's outlook on the economy, Dr Reddy said a formal response would come in the monetary policy statement. "Till the monetary policy review is made we will stick to the basic projections," he said.

Speaking informally to journalists here at the end of a meeting of the Central board of directors of the RBI to review the performance of the Indian economy during the first three months, Dr Reddy observed that the financial markets in the country were "by and large stable."

For liquidity management, the size of the Market Stabilisation Scheme and Liquidity Adjustment Facility - the two instruments the RBI has to stabilise the debt markets - has to be consistent with the need to maintain stability.

Stressing that the objective of liquidity management was to maintain stability in the markets, Dr Reddy said that MSS and LAF were being appropriately "modulated". "The results are there for everybody to see," he said.

Asked for a comment on the impact of the monsoon on the economy, Dr Reddy said that while "there is nothing to show that there will not be a normal monsoon," the RBI would not come to a conclusion until it gets more data. "We have to see. We are getting the assessments," he said.

In an informal chat with Business Line, Ms Usha Thorat, Executive Director, RBI, said there was no variance between the stand of the Government and of the RBI as regards foreign direct investment in banking. When it was put to her that while the Government allows 74 per cent FDI in banking, the RBI calls for diffused ownership, with no one entity owning more than 10 per cent in a bank, she replied that there was no differences in the views of the Government and the RBI. The Government does not say that only one entity should have 74 per cent stake in a bank, she observed.

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