RBI has discussed contingency plans with finance ministry: Raghuram Rajan
Not only is political, but financial sector too is agog with Lok Sabha poll results. To deal with excessive volatility post elections results, the Reserve Bank of India (RBI) has discussed contingency plan with the finance ministry.chandigarh Updated: May 15, 2014 20:46 IST
Not only is political, but financial sector too is agog with Lok Sabha poll results. To deal with excessive volatility post elections results, the Reserve Bank of India (RBI) has discussed contingency plan with the finance ministry.
"To deal with excessive volatility from the elections results, RBI has discussed contingency plans with the finance ministry," Governor Raghuram Rajan said here on Thursday.
Rajan said RBI has discussed its plan with the finance minister and the stock market regulator (Securities and Exchanges Board of India).
Rajan, who was here for RBI board meeting, told the media that based on some assessment of the elections results, there may be market volatility.
"In anticipation of the results, the markets had rallied in recent weeks and was very buoyant and there may or may not be market volatility," he said, adding, "RBI will also be ready to deal with any volatility in the rupee, if it occurred,"
On 'volatility' in markets and rupee 'crashing' in case of a hung parliament, Rajan said that RBI has kept a vigil on the situation closely and would also push liquidity if such situation arises.
Replying to a question about challenges before the new government, Rajan said that the new government would have to deal with four macroeconomic challenges, including growth, Inflation, fiscal deficit and current account deficit.
He said RBI has been working with the incumbent government and would work with the new one to meet up all challenges, especially to bring down the consumer price index (CPI) inflation rate below 8% in January 2015 and below 6% till the end of next year as per the accepted recommendation of Urjit Patel committee. "We are comfortable that the current environment will allow it to meet a consumer inflation target of 8% by the end of the year," said Rajan.
Urjit Patel committee had recommended on monetary policy framework to set CPI from 10% to 8% by January 2015.
Further, expressing his concern about 10% non-performing asset (NPA) in the banking sector, he said it was a large number and a framework would be developed to stalk it.
Setting aside its role in bringing back the black money, he said that the central bank had no role to bring back the black money. "Bringing back black money is function of the government and its revenue department," said Rajan, adding "RBI can help in detecting and tracking large foreign exchange transactions."