RBI’s new research centre – CAFRAL

I just missed this development completely. ET alerts me to this story of a new RBI centre – Centre for Advanced Financial Research and Learning – or CAFRAL. It is headed by ex RBI Deputy Governor Ms. USha Thorat. Website of CAFRAL is here.

Her interview is here. She says CAFRAL would like to be a kind of interface between academia, practitioners and bankers:

What is CAFRAL about? What is its mandate?

We had a vision for this centre in 2006 when the Prime Minister and former governors and deputy governors were here for a function. We felt that our bankers training college (BTC) needed to be revamped. Although some of its programmes were well-regarded, most banks have now developed their own training establishments. And markets have also taken care of training needs of bankers. So we had to reinvent ourselves.

Dr Y.V.Reddy, then Governor, felt that instead of focussing on training, we need to focus on research and learning. We wanted to develop this into a global hub for policy research in banking and finance — of use to policy makers and central bankers and serving the requirements of the system. The context was also that as India was a growing into a dominant player, its financial sector should also set its aspirations higher and try and become a more important player in the globe.

When I left the RBI, the governor asked me to take up this role. I liked the idea because I have been participating in global conferences and been part of various committees. There is so much of research that is done in these countries on regulatory issues.

She explains we accept global regulations but do not know their impact. Their is hardly any research on these issues:

Today, we are accepting global standards and internationally accepted guidelines such as capital adequacy, the methodologies and so on. But we don’t have enough research to even differ with that approach. Take for instance the issue of having countercyclical buffers if credit to GDP ratio exceeds a particular level. Now, we are an emerging country whose Credit-GDP ratio will grow for the next few years. So what we said is that we’ll look at credit to certain sectors — such as real estate or capital market and when they go beyond our comfort zone, we’ll put in limits and build buffers.

And that has worked better. But all of these things – about what made us decide on 2 per cent provisioning for instance, we need lot more research. We have been quite hard-pressed when we have gone to Basel committees with our prescriptions. We also need to build capacity both with the regulator and the regulated entities.

 The need becomes more grave after the crisis when so much is happening in area of financial regulation.

It will hold conferences and discussions to learn share and dissminate amidst financial sector people.

We are planning to have programmes for boards of banks — for their directors. We will start with a CEO’s conference on May 28 — where we are going to discuss business strategies in the changing regulatory landscape — about coping with new demands for raising more capital. We are going to discuss regulatory challenges — the issue of addressing growth challenges while also keeping an eye on risks and destabilising factors, the trade-offs that are required to maintain a stable financial system.

We are going to look at financial markets, financial stability and financial inclusion. Later on, we can look at things like e-learning, like what other global institutions have — where they put even regulators and heads of institutions through a ladder of tutorials. I have found this whole thing quite exciting.

Excellent stuff. Looking forward to research from the centre. It should lead to more informed debate on finance in India.

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One Response to “RBI’s new research centre – CAFRAL”

  1. rajesh kumarr Says:

    i came to know about cafaral through et.i want regular feed back

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