RBI Governors’ press statement – ushering in more transparency

I had commented y’day about RBI getting more transparent and above all communicating more effectively. I discovered another development which adds to the transparency point.

 RBI Governor talks to the press after the mon policy and this statement is a record of the same. The practice of publishing the press statement was started by Dr Subbarao. It was first put on the website for his first monetary policy meeting in October 2008. January 2009 statement is  here, April 2009 statement is here.

From April 2009, the statement started a new trend. It started reporting about Central Bank’s meeting with commercial bank heads. It said:

“This morning, I had a meeting with the chiefs of major banks where we announced the annual policy of the Reserve Bank for 2009-10. The meeting also provided a valuable opportunity for the Reserve Bank and the commercial banks to understand and appreciate each others’ perspectives. 

RBI released July 2009 statement of the Governor. July 2009 statement goes a bit further than the April 2009 one:

“This morning, I had a meeting with the chiefs of major banks where we announced the monetary policy of the Reserve Bank for the remaining period of 2009-10 in the light of the macroeconomic developments so far. The meeting also provided a valuable opportunity for the Reserve Bank and the commercial banks to understand and appreciate each other’s perspectives.

Bankers generally welcomed the Reserve Bank’s policy stance. They felt that the status quo on policy rates would anchor interest rate expectations that could spur investment demand. They indicated that they are seeing signs of revival in the domestic economy and expect credit demand to pick up in the second half of the year.  In this context, I emphasised the need to increase the flow of credit, particularly to agriculture and micro, small and medium enterprises. 

Banks were concerned that their liability structure is getting shorter with the reduction in the term structure of deposits, while the asset structure is getting elongated on account of the increasing share of long-term loans, particularly infrastructure. Several banks also indicated that the share of current and savings (CASA) deposits has been declining, which would put pressure on their net interest margins (NIM).  As regards credit quality, banks were of the view that non-performing assets (NPAs) are expected to increase, particularly, in the unsecured segments, although they will remain manageable.  Going forward, public sector banks emphasised the need for raising capital as risk-weighted assets expand in their asset portfolio.

So, this time discussion with central bankers is shared witht he public. It tells you about the concerns of commercial bankers in the crisis which is a useful value addition. In all, I think RBI is getting more transparent with each mon policy. Great developments.

2 Responses to “RBI Governors’ press statement – ushering in more transparency”

  1. Fixing the unsustainble global imbalances is the main lesson of this crisis « Mostly Economics Says:

    […] imbalances is the main lesson of this crisis By Amol Agrawal Dr Subbarao’s speeches (and mon pol statements) just get better and better. His recent speech(JRD Tata Memorial Lecture -2009) is a must read for […]

  2. RBI Third Quarter 2009-10 review – just 13 pages « Mostly Economics Says:

    […] Third Quarter 2009-10 review – just 13 pages By Amol Agrawal I had posted on how RBI Governor Mr Subbarao is ushering in more transparency at the central […]

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