'Indian banks should be thinking long term'
Indian banks need to keep thinking about their longer-term plans and recognise that policy steps taken to counter the global financial crisis were temporary, a deputy governor of the RBI said.india Updated: Nov 25, 2008 14:10 IST
Indian banks need to keep thinking about their longer-term plans and recognise that policy steps taken to counter the global financial crisis were temporary, a deputy governor of the Reserve Bank of India (RBI) said.
"While the temporary counter-cyclical measures taken by the RBI are as per the need of the hour, it has to be borne in mind that the measures are ad hoc in nature in response to a particular situation," said V Leeladhar, deputy governor in charge of banking regulation.
Leeladhar spoke in Kolkata on Monday, and the central bank released a copy of his speech on Tuesday.
Since early October, the central bank has aggressively eased policy, cutting its main lending rate by 150 basis points and slashing banks cash reserve requirements by 350 basis points.
It has also reduced the amount of government bonds banks have to hold to enable them to raise funds, and opened a special refinance facility to help keep credit markets functioning.
"The banks would be well advised to ensure that their business strategies and decisions are guided by the longer-term perspective of the systemic and macroeconomic developments and are not unduly influenced by the current episode of the exceptional events," he said.
Leeladhar said the steps were aimed at infusing liquidity, maintaining financial stability and ensuring availability of adequate credit to the productive sectors of the economy.
"While the package of measures has had some positive effect, the challenges still remain as the global uncertainties continue to persist," the deputy governor said.