INSUBCONTINENT EXCLUSIVE:
The so-called conflict between the Reserve Bank of India (RBI) and the government is more apparent than real
RBI is an institution of the state, answerable to the government, manned by people chosen by the government, acting under laws favoured by
the government and legislated by Parliament, working to provide financial stability and play its role in maintaining macroeconomic
stability, so that the nation can grow and prosper, an outcome that would bring credit to the government
The civil aviation minister might be able to barge into the air traffic control tower but should he try to actually control the take-off and
landing of planes The RBI board should not trespass on regulatory turf.
The government has a reasonable case when it asks RBI to hand over
excess reserves; RBI can do it, for the express purpose of recapitalising banks
Shadow banking is not something that should grow the way it has been growing in India: in the year to September, bank lending to NBFCs
soared 41 per cent, and, as a column by M C Govardhana Rangan (ET, Nov 6) points out, NBFC stock prices have zoomed, as they raised cheap
short-term money and lent long at big spreads, even as bank stocks malinger
All that is happening now is that NBFCs are being forced to issue longer-tenor paper at higher rates, squeezing their margins
They should raise more capital at their fancy stock prices, not raise the alarm that the sky will fall down if they cannot raise money at a
whisker above the repo rate
would have been taken, credit would flow
RBI can help the government find the funds, with its excess reserves
