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At a time, different views are floating around on the nature and role of the Reserve Bank of India (RBI), its Governor Raghuram Rajan feels that the financial system in the country is `too friendly to leverage.’
Stating that big corporate infrastructure players had taken too much debt, Rajan said that RBI had not stood sufficiently against it in his messages to RBI employees on the occasion of its 80th anniversary.
``The nation has enormous financing needs in the infrastructure and far too many of our banks already have too much exposure. The required national push to fiancé infrastructure should not override financial stability which is key to national security,’’ the Governor said.
There was a need to develop new resources for risk capital for infra funding requirements with moderate leverage.
Referring to the development of the financial sector, Rajan said even as many new players such as payments banks, small finance banks and possibly a postal bank besides a variety of non-bank finance companies were expected come in next one year, RBI’s intent was to create an ownership neutral, institutional neutral and technology agnostic level competitive arena.
``The state of the art payments systems developed by RBI will play a critical role here even as the RBI embarks on cyber-supervision and monitors cyber security.’’
RUPEE
On the position of the rupee, Rajan said it was becoming `truly’ international. Though many governments in developing countries were forced to borrow only in foreign currency, the Reserve Bank had fostered a liquid rupee government bond market where the Government is today able to contemplate issuing 40 year bonds.
``Foreign investors are eager to buy our Government bonds and foreign institutions are queuing up to issue rupee denominated bonds,’’ he pointed out.
He also had a word of advice for his staffers. Institutions such as RBI should be nurtured from outside and constantly rejuvenated from inside. ``Rejuvenation means constantly thinking about how we can do better in serving the people,’’ Rajan said.
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