RBI to checkmate undue volatility in markets

August 25, 2015 11:18 pm | Updated March 29, 2016 05:25 pm IST - MUMBAI:

The Reserve Bank of India (RBI) Deputy Governor S.S. Mundra on Tuesday said that the RBI would certainly be there “to see it is not an unruly and undue volatility in the market.”

However, “we have always been telling that it is not a particular level of the rupee which can be targeted,” said Mr. Mundra on the sidelines of the FICCI-IBA banking conference here.

Mr. Mundra was talking on the free fall in financial markets on Monday on concerns of slowing Chinese economy.

“Markets are supposed to be quite wise and they are capable of governing themselves so I don’t think it is for a central banker to offer any advice to market at this point of time,” he added.

According to him, in medium to long term the economy is on the right path. “The reform agenda is progressing in the right direction.”

Having said that, Mr. Mundra added, “we have always been telling that we are the stage where we cannot be disconnected from the global events. We are inter-connected market and there would be occasion when these kinds of things will happen but I think the solution is the right mix of the medium and long term policies.”

While talking at the conference Mr. Mundra said that “There was an immediate need to spot the grey zones and the jurisdiction of regulators must be established at the earliest in such areas to stop proliferation of unlawful practices in financial sector.”

He said that in today’s complex environment to plug the loopholes, financial institutions should make an effort to learn from each other’s experiences and share best practices. According to him, innovation should be encouraged but new financial products should be run through a regulator before they are introduced in market.

 Mr. Mundra said that the regulator in such a scenario would need to ensure that timely approval is being granted to the innovator maintaining secrecy of the product so that the innovator’s interest remains unhurt.

 Speaking in context of crowd-funding and peer-to-peer lending, Mr. Mundra said that it is impossible to regulate the choices of individuals hence there is a need to bring about a legislative change to regulate the electronic platform. He added that there is a need to draw right insights to prevent harmful disruptions and external review by rating agencies should be encouraged.

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