CHENNAI (TIP): The governor of the Reserve Bank of India, Raghuram Rajan on July 2 said that the Indian economy was in a recovery phase. “There are signs of pick up in capital investments,” he said. But he added that sustainable growth would require greater reforms and putting stalled projects back on track.
The governor was in the city for a RBI board meet. Rajan also said that India’s exposure to Greece was very, very limited. “The direct exposure is very limited for India. But there is some indirect exposure like how the Euro would react to the Greece situation.” He added after the initial burst of volatility, investors will start differentiating. “Our growth prospects are good and the buffers that we have are reasonable, including foreign exchange,” Rajan said.
He added that exports remained an area of relative concern but they have been weak across all Asian economies, barring China. On monsoon, the governor said the news on the rain front has so far been good. “The monsoon thus far has been above normal. Of course, there are varying predictions moving forward,” he said.
The central bank and SEBI will discuss a plan to examine the foreign investment limits in government debt. “We have broadly decided to look at limits twice a year. We are committed to a steady expansion in FII participation,” Rajan said. On asset quality in the banking system, Rajan said the RBI was working with banks to ensure that they recognize the problem early and take remedial actions. “Clearly the government has to play a role here as well by helping resolve the large stuck projects and that is being worked on,” Rajan said. He also said that the RBI was tracking implementation of schemes such as the 5/25. This scheme allows banks to extend long-term loans of 20-25 years to match project cash flows, while refinancing them every five or seven years.
At the RBI board meet on July 2, members also discussed the setting up of a NBFC (non banking finance company) that would essentially be an account aggregator for the common man. This common account aggregation facility, will allow people to get details of all their financial assets in one place.