RBI governor Raghuram Rajan's key proposals
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RBI governor Raghuram Rajan's key proposals

Last Updated: Thursday, September 5, 2013, 11:21
 
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RBI governor Raghuram Rajan's key proposals
New Delhi: New RBI Governor Raghuram Rajan Wednesday came out with a slew of measures, including more trade settlement in rupees to rescue the battered financial markets and hinted at a shift in focus from inflation control, doggedly pursued by his predecessor, to boosting growth.

Below are some highlights of the proposed action.

MONETARY POLICY

• Postpones first monetary policy statement as Governor to September 20 from September 16

• To set up a panel on how to strengthen monetary policy framework, which will submit report in three months

RUPEE, CAPITAL INFLOWS

• To allow exporters to re-book cancelled forward currency contracts up to 50 pct of the value of cancelled contracts and up to 25 percent for importers

• Will push for more trade settlements in rupees, open up financial markets for those who receive rupees to invest back in

• Will offer a special window for swapping foreign currency non-resident (FCNR) deposits with a minimum tenor three of years and more, at a fixed rate of 3.5 percent per year

• Will raise overseas borrowing limit of 50 percent of unimpaired Tier I capital to 100 per cent for banks

• Borrowings mobilized under this provision can be swapped with RBI at a concessional rate of 100 basis points below the ongoing swap rate prevailing in the market

• Above schemes will be open till November 30, 2013

DEBT / BROADER MARKETS

• Will introduce cash-settled 10-year interest rate future contracts

• Will examine introduction of interest rate futures on overnight interest rates

• Will steadily but surely liberalise markets, restrictions on investments and position-taking

• To issue inflation-indexed savings certificates tied to CPI to retail investors by end November

• Need to reduce requirement for banks to invest in government securities in a calibrated way

BANKING SYSTEM

• To set up external committee to screen bank license applicants

• Hopes to announce licenses within, or soon after, January 2014

• Will push foreign banks to set up wholly-owned subsidiaries

• Will look at continuous or on-tap bank licensing system for applicants

• Will issue guidelines to free rules on setting up bank branches for domestic commercial banks

• To look at rising non-performing assets and restructuring/recovery process

• Need to accelerate the working of debt recovery tribunals and asset resconstruction companies

• Proposes to collect credit data, examine large common exposures among banks

• Will encourage banks to clean up their balance sheets.

• Will encourage banks to commit to raising capital when necessary

• Bad loan problem is not alarming yet, but will fester if unaddressed

• To set up committee that will access every aspect to financial inclusion

Reuters



First Published: Thursday, September 5, 2013, 08:44


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