Afternoon D & C Dedicated To Mumbai
Home > Business & Investment > A strong balance sheet essential for independence, credibility of RBI: Fitch

A strong balance sheet essential for independence, credibility of RBI: Fitch

Monday, December 03, 2018

Pitching for a strong balance sheet for the Reserve Bank, Fitch Ratings said it was essential to ensure independence and credibility of the central bank.

The RBI board last month decided to set an expert committee to decide the economic capital framework of the RBI to determine the appropriate amount of reserves which the central bank can hold.

Currently, the capital base of RBI is Rs 9.69 lakh crore; and independent director S Gurumurthy and the finance ministry have been wanting it to be lowered in line with global practices.

"A strong balance sheet generally supports central bank independence and its policy credibility," Fitch Ratings Director (Sovereign Ratings) Thomas Rookmaaker told PTI in an interview.

He, however, did not express any opinion on the optimal amount of reserves which the RBI should hold.

While the central banks globally hold 14 per cent reserves, the RBI keeps around 27 per cent of its capital as reserves. Reduction of capital reserves to global level could free up to Rs 3.6 lakh crore.

There was a stand-off between the RBI and the Finance Ministry over several issues, including easier funding norms for the MSME sector, implementation of the capital adequacy norms and economic capital framework of the central bank.

Commenting on the tiff, Fitch Ratings Director (Financial Institutions) Saswata Guha said there are differences between the central banks and governments across the world.

"Differences between the central bank and government authorities are nothing new. I do believe that central banks require autonomy and I don't see any strong evidence that suggests that the same has been compromised in RBI's case.

"Such instances are not unique to just India but are/were visible between central banks and their respective governments globally," Guha said.

The RBI board in its November 19 meeting decided to set up an expert committee to decide on the capital framework, the membership and terms of reference of which will be jointly determined by the government of India and the RBI.

No Comments Posted
City news
The Prakash Ambedkar led party had fielded its ...
Two women, both senior citizens, died in a ...
A massive fire engulfed a four- storey commercial
I am in a fix. I have been happily married for 4
Dr. Rajan B. Bhonsle, M.D. (Bom)
Consulting Sex Therapist & Counsellor
Dr. (Mrs.) Minnu R. Bhonsle, Ph.D.
Consulting Psychotherapist & Counsellor
Select Sun sign:
Aries (Mar 21 - Apr 20)
Aries (Mar 21 - Apr 20)You are likely to remain careful and watchful today, foretells Ganesha. And because you'll be invited to parties and other social events, your enthusiasm will remain buoyant. You will also strike the right balance between business and pleasure, says Ganesha.
- Advertising -
Read More