RBI to track financial stability

Mumbai

Sept. 10: The Reserve Bank of India (RBI) has set up a multi-disciplinary financial stability unit and is planning to put out a regular financial stability report to keep track of the economic crisis.
Dr D. Subbarao, the Reserve Bank governor, said the first report would be released in the next few months.
Speaking at a seminar in Mumbai on Thursday he said: “We are yet not able to decide the exit strategy with respect to the re-winding of the monetary measures we took earlier. But we would take it at an appropriate time.”
Mentioning that the tensions between fiscal and monetary policies could potentially militate against financial stability, Dr Subbarao said: “If governments continue to incur large fiscal deficits, it will be much more difficult for the central bank to maintain the price stability. Higher inflation could also push the yields upwards.”
He further added, “This could result in significant mark to market losses for the fixed income instruments with potentially adverse implications for banks’ profitability. This could again impair financial stability.”
Dr Subbarao further said: “The government has asked the finance commission to indicate a road map for returning to the path of fiscal consolidation. It is imperative that both the centre and states in India return to a path of fiscal consolidation for many reasons. These includes the need to preserve financial stability.”
Source:: DC