Stability mandate

Financial stability will be made an explicit mandate for the central bank by amending the Reserve Bank of India Act, said Mr Harun Rashid Khan, Deputy Governor.

The Financial Sector Legislative Reforms Commission (FSLRC) is considering proposing an amendment to this effect, he added.

The RBI is already committed to price and monetary policy stability, Mr Khan explained.

To secure the health of the country's financial sector, the term “financial stability” could be incorporated in the RBI”s Preamble.

Currently, the Preamble describes the basic functions of the Reserve Bank as: “...to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage."

NPA provisioning

The RBI is not considering any proposal to give special dispensation for banks regarding provisioning, despite the rise in non-performing assets.

The NPA situation, according to Dr K. C. Chakrabarty, is not a cause for concern.

As announced by the Governor, Dr D. Subbarao, in the third quarter review of the Monetary Policy for 2011-12, Deputy Governors Dr Chakravarty and Mr Anand Sinha will have a meeting with about 10 large banks later this month to discuss the NPA situation.

The meeting will also look into the measures that need to be taken by the banks, the Reserve Bank, the State governments, and the Central Government to ensure that the profitability and the viability of the banking system is intact as it is now.

On the widening trade deficit, Dr Chakrabarty quipped that the rupee has appreciated by 6 per cent and the media should not focus only on the negative news.

Role reversal?

Referring to a meeting with the Finance Ministry, Dr Subir Gokarn, in a lighter vein, spoke about the role reversal between the Finance Ministry and the RBI.

At the meeting, while Dr Gokarn spoke on food inflation, Dr Kaushik Basu, Chief Economic Advisor, Finance Ministry, held forth on monetary policy.

> kram@thehindu.co.in

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