RBI releases Minutes of its Monetary Policy Meeting

RBI calls it One More Step towards Transparency but it could be called a leap actually.

RBI has decided to release minutes of its monetary policy meetings.  It just released minutes of its meeting held on Jan 19, 2010 for arriving at the policy outcome for the formal meeting on Jan 25, 2010. So with a lag of almost a month we get the minutes of the monetary policy meeting.

RBI actually calls it Technical Advisory Committee (TAC) which has both internal and external members. It meets quarterly ahead of the monetary policy. With midterm reviews now, may be it would be meeting eight times in a year now.

I had indicated in this paper that how RBI has moved into a process of increased transparency under Governor D. Subbarao. The paper highlights the key changes in RBI’s monetary policy in the last three years or so. At the end it said:

The above analysis tracks the recent initiatives taken by central banks to improve transparency in their communication process. The paper also explores the recent changes done by RBI to improve its communication process and finds the changes are in line with global central banking. The process is continuous and we are likely to see more additions to RBI’s communication tool-kit in future. Just like other central banks, RBI may also consider in future, releasing minutes of its monetary policy meetings and also provide quantitative assessment of its forward guidance. All this augurs well for Indian central bank watchers and market participants.

It has come out quicker than expected.

Back to the minutes. It is pretty crisp and members are concerned over inflation.

Then it has some interesting suggestions given by members. It does not name members who gave these suggestions so leaves it open to markets to guess:

Several members of the Committee expressed concerns about the high and rising current account deficit. It felt that such a high level of current account deficit was not sustainable. The current account deficit was financed largely by portfolio and other short-term capital flows. They, therefore, also expressed concern over the slowdown in FDI flows, especially when such flows were quite buoyant in other EMEs. The Committee was of the view that if the global recovery was stronger than expected, it could adversely impact capital flows to India, going forward.

Most members of the Committee were of the view that the repo and reverse repo rates be raised by 25 basis points each. One member suggested 50 basis points increase in the repo rate and 25 basis points increase in the reverse repo rate. In addition to increase in the policy rates by 25 basis points each, one member was of the view that the statutory liquidity ratio (SLR) could be increased to reduce the borrowing capacity of the banks and the Repo facility could be linked with the credit-deposits (CD) ratio of banks to bring in discipline. Two members were also of the view that small and managed depreciation in currency could be considered to manage CAD, while another member suggested a hike in the cash reserve ratio (CRR) to contain inflation.

Dr. D. Subbarao, Governor and Chairman of the TAC chaired the meeting. Other members present were: Dr. Subir Gokarn, Vice-Chairman, Smt. Shyamala Gopinath, Dr. K.C. Chakrabarty, Shri Anand Sinha, Dr. Shankar Acharya, Shri Y.H. Malegam, Shri Sanjay Labroo and Prof. Sudipto Mundle. Prof. Samir K. Barua and Dr. A. Vasudevan could not attend the meeting but submitted their written comments. Prof. Dilip M. Nachane could not attend the meeting. Shri Deepak Mohanty, Dr. Janak Raj, Shri K.U.B. Rao, Shri Pardeep Maria and Shri Amitava Sardarwere in attendance.

Based on speeches of the RBI members and artilces written by others (actually it is just Shankar Acharya who writes articles), one would try and guess who said what. But it is just a speculation.

Over a period of time RBI might clarify on who said what and then let the person clarify his stance in speeches/articles later  like it is done in other central banks.

Excellent stuff from RBI..

2 Responses to “RBI releases Minutes of its Monetary Policy Meeting”

  1. BoE MPC divided further « Mostly Economics Says:

    […] MPC divided further By Amol Agrawal We do get some hints on division in RBI’s TAC, but nothing compared to divisions in BoE’s MPC. In the recent meeting in Feb 2011, there […]

  2. Know your money’s voice as money talks « Mostly Economics Says:

    […] do check out the website of this awareness drive. Very nicely explained. The increased transparency is showing in most tasks. It isn’t just limited to monetary policy […]

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