RBI deputy governor calls for 'effective independence'
By Suvashree Choudhury MUMBAI (Reuters) - India's central bank needs to be more independent to improve macroeconomic stability, Reserve Bank of India (RBI) Deputy Governor Viral Acharya said on Friday, warning that undermining a central bank's independence could be 'potentially catastrophic'. In a speech, the text of which was posted on RBI’s website, Acharya also said policies should be 'rule-based'
By Suvashree Choudhury
MUMBAI (Reuters) - India's central bank needs to be more independent to improve macroeconomic stability, Reserve Bank of India (RBI) Deputy Governor Viral Acharya said on Friday, warning that undermining a central bank's independence could be "potentially catastrophic".
In a speech, the text of which was posted on RBI’s website, Acharya also said policies should be "rule-based".
"To secure greater financial and macroeconomic stability, these efforts need to be extended to effective independence for the Reserve Bank in its regulatory and supervisory powers over public sector banks," he said.
His comments come amid government efforts to create a separate regulator for the country's payments system – which is currently handled by the RBI as part of its functions related to banking regulations.
Government officials have also been calling for the RBI to relax lending restrictions for some banks that have a low capital base.
Undermining a central bank's independence was "potentially catastrophic" and could "trigger a crisis of confidence in capital markets," Acharya said.
India’s financial markets have been in turmoil since September due a series of recent debt defaults by Infrastructure Leasing & Financial Services (IL&FS), one of the country’s largest infrastructure financing companies, which triggered worries about the health of the entire shadow banking sector.
While the government and the RBI have taken several steps to ringfence the impact of those defaults by replacing the company's board and increasing banks' funding limits for non-banking finance companies, investors remain sceptical.
Referring to non-banking finance companies, Acharya said that systemic risks can build up in shadow banking when important parts of financial intermediation are kept outside the purview of the central bank which could come at "substantive costs to future generations in the form of unchecked financial fragility."
“The Reserve Bank’s independence has remained a work in progress, an enduring challenge that the nation has been grappling with on an ongoing basis,” he added.
(Writing by Zeba Siddiqui; Editing by Toby Chopra)
This story has not been edited by Firstpost staff and is generated by auto-feed.
By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States
BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.