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Compliance to norms a must: RBI’s message to Ola, Uber

business Updated: May 08, 2016 01:35 IST
Raghuram Rajan

In this file photo, the facade of the Reserve Bank of India (RBI) head office in Mumbai can be seen. (AFP)

Asserting that taxi hailing apps such as Ola and Uber must comply with its norms, the RBI said on Saturday it is not a “paper tiger” and will enforce all regulations irrespective of whether they are “good, bad or ugly”.

RBI governor Raghuram Rajan also said that as a regulator, the central bank was open to modifying regulations if necessary, while a number of steps have already been taken, including the ‘touch-and-go’ credit card facility.

Rajan was responding to a question on problems he foresees in the taxi hailing sector and how RBI would respond.

“I want to be very very clear here. We did move against one of the taxi providers because they were violating our regulations as they stood. We needed to bring them in to compliance to the regulation.

“And this is something I want to emphasise. Our intent is whatever regulations are on the books -- good, bad, ugly -- they have to be complied with ...if regulation is a bad regulation, we change the regulation. But what is on books has to be enforced. We don’t want to be a paper tiger. We should not be a paper tiger.” he said.

RBI, he added, was trying to streamline its regulations and has come up with bunch of master circulars for easier reference.

On a question to when India will become a ‘two-eyed king’, in a reference to his earlier ‘one-eyed king’ comment, Rajan said, “It depends both on what the rest of the world does and what we do. If rest of the world accelerates and we don’t, obviously it takes us longer. My sense is the way recovery is picking up ...perhaps before rest of the world accelerates.”

Earlier, finance minister Arun Jaitley had virtually rebutted Rajan’s remarks that India is ‘one-eyed king in the land of blind’, saying compared to the rest of the world, the Indian economy is growing much faster and, in fact, the fastest.

Rajan said if the banking system fails to deal with the problem of bad debt now, it would explode.

“At some point you will have to bite the bullet and say the world is not getting better, the economy is taking time to recover, this problem will explode, if we don’t deal with it now.

“And that’s why the RBI has been very focused in dealing with the problem. And I think we have it contained,” the RBI Governor said, adding India is proceeding with the financial reforms in a steady manner.

Replying to a query, Rajan said tariff that helps a particular producer is a cost to another producer who buys the output.

“So in rendering one segment competitive, we may render other segment uncompetitive. If this happens based on lobbying then we run the risk of introducing practices that we did away in past. So we have to be very careful,” the RBI Governor said.

He expressed hope that US Fed will tread cautiously on its rate decisions.

Observing that several countries across the world are deleveraging their economies, Rajan said conventional monetary policy may have run out of steam and additional stimulus is not triggering growth in the world economy.