Business Mantra News
- International Monetary Fund announced in its report that India needs to consolidate the autonomy of its Central Bank i.e. RBI.
- Reserve Bank of India is the Central Banking Institution which controls monetary policies and regulates all Banks.
- The IMF says in its report that India should ensure independence of RBI so as to help it to supervise the activities of Banks and lessor interference of the Central Government in the affairs of the Banks and the RBI
- IMF report also suggested that loan classification and provisioning rules should be reviewed to ensure they reflect observed losses, and to reduce special loan categories.
- It emphasized that it should introduce a risk-based affluent regime for insurance companies, combining the errors of commodities markets and addressing risks from politically exposed persons and the gold sector.
- These observations are made by IMF in its Financial System Stability Assessment (FSSA) for India.
- It is worth mentioning here that the India has recorded strong growth in both economic activity and financial assets since 2011 Financial Sector Assessment Program (FSAP).
- India should ensure RBI’s De jure autonomy as well as its supervisory and enforcement powers over the Public Sector Banks.
- The IMF praised the Government’s plan to inject about $32 billion to recapitalize state run Banks as an important step towards pragmatic resolution of non-performing assets.
Despite this effort of Government, the IMF urged India to take step to restructure state runs Banks as well as action should be initiated to improve corporate Governance and a reduction of the government’s stake in the state owned Banks.