RBI ready for volatility in financial markets on poll results – Dr Raghuram

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Shimla : In a buoyant market that in anticipation of the election results have rallied in recent weeks, RBI Governor Dr. Raghuram G Rajan stated that the central bank along with Sebi and finance ministry was prepared to deal with excessive volatility in the financial markets.

A day ahead of the election results, the governor talking to reporters here said “the Reserve Bank was fully prepared for any volatility in the markets tomorrow when the Lok Sabha election results are to be declared. Along with other regulators including Sebi and finance ministry, the RBI would be monitoring the day’s developments as the election results begin to come in.”

He said, “stress tests of various balance sheets had been done and an eye was being kept on liquidity.”

In anticipation of the results, the markets had rallied in recent weeks and were very buoyant, he added.

Governor Raghuram Rajan interacting with media at Shimla

Governor Raghuram Rajan interacting with media at Shimla

Expressing concern at the prevailing high food inflation rates even though core inflation had marginally moderated, Dr. Raghuram said that policy view on interest rates would be reviewed at the next meeting after considering all factors.

He said that the target was to bring food inflation at under 8%, citing several reasons including growth in agriculture and supply constraints responsible for it.

Talking to reporters here, the RBI governor also expressed concern at the prevailing about 10 % NPA’s (Non Performing Assets) in the banking sector, which included about 3.9% in the loan portfolios. “It’s a large number,” he said, “a framework would be developed to stem NPA’s.”

Sounding optimistic about the election results throwing up a stable government, Dr Raghuram G Rajan said that much lot of these NPAs were tied to growth, for growth would create demand that would improve revenues and the NPAs would fall.

Non committal about the central bank intervening to prevent the rupee from rising against the dollar, Raghuram said that the bank was keeping a tab on the rupee’s volatility. “Exports figures were very encouraging and the current account deficit (CAD) had narrowed down,” he said.

In response to a media question the governor brushed aside that the central bank had any role to bring back black money saying it was function of the government but they could help in detecting and tracking large foreign exchange transactions.

He said that the RBI Board had met earlier in the day, where a review of the currency department, monetary policy, internal debt, GDP, CAD and other issues was done.

Responding to banking issues related to Himachal Pradesh, the RBI Governor said, it was one of the richer states where the per capita income was pretty high.

A bank branch for every 3009 people was very good but in sparsely populated regions financial inclusion and providing banking services was a problem, he said.

Deploying banking correspondents using mobile technology was an option under consideration for reaching such remote habitations that could overcome some very weather related problems also.

Editor-Reporter with Hill Post, Ravinder Makhaik as a journalist has for over two decades worked for India’s leading newspapers and television networks.

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