YV Reddy calls for Tobin tax again

Former Reserve Bank Governor Y V Reddy today called for imposition of Tobin tax,saying such a step can curb volatility in the entire financial markets,especially in the currency segment.

Tobin tax,named after American Nobel laureate economist James Tobin,is a levy on short-term cross border capital flows. Tobin tax should be imposed to control currency volatility as there is an element of incentives behind these wild fluctuations in the forex markets, Reddy told reporters on the sidelines of a meet on the financial stability. Explaining further,he said,Since currency holders are mostly the market intermediaries,there is an element of volume play in the market. Since higher volume brings in higher fees,we need to look into this and introduce banking transaction charges or Tobin tax to curb this volatility. The former central banker is credited with firmly anchoring the domestic banking system from the 2008 global financial meltdown.