RBI top brass focuses on reforms

AHMEDABAD, Nov 15: Although India's progress has been satisfactory on most fronts, however, some issues continue to stay at the forefront su...

AHMEDABAD, Nov 15: Although India’s progress has been satisfactory on most fronts, however, some issues continue to stay at the forefront such as reduction in fiscal deficit, review of non-performing assets (NPAs), debt recovery norms, crowding out of small and medium enterprises from credit market, internal systems within the banks including work practices, upgrading work skills and technology etc.

This was stated by Dr Y V Reddy, deputy governor, Reserve Bank of India, here on Saturday at `Fundamentals ’98, Finance Fair’, organised by BETA finance club of IIM. He said that ownership and control of banks also remain one of the key issues.

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Reviewing reforms as a process, Dr Reddy mentioned that RBI had adopted a five-pronged approach including a conscious sequencing of reforms to give enough time to all participants to appreciate and respond; mutually reinforcing measures such as reduction in export refinance together with reduction in cash reserve ratio; complementarity of reforms between banking sector and changes in fiscal, external and monetary policies such as trade liberalisation coupled with current account convertibility; development of financial infrastructure in terms of institutions, standards, technology and legal framework; and measures to integrate money, debt and forex markets to benefit the users.

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Vikram Gandhi, president, Morgan Stanley India Limited, in his talk on `From Patronage to Performance’ emphasised on performance of Indian Foreign Portfolio Investment sector vis-a-vis other markets in the world. He said that returns from Indian and other emerging markets have not been commensurate with the risks associated with them.

On the other hand, Gandhi said, returns from the US, the UK and other developed markets have been higher inspite of lower risks associated with them. This is a cause of concern among the foreign institutional investors (FIIs) regarding increasing exposures in India and other emerging markets, he said.

He stressed on importance of performance and said that irrespective of all other factors, it is the fundamental performance of any sector that decides the level of foreign investment coming into the sector.

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