Mumbai, Aug 9 (IANS) The Reserve Bank of India (RBI) has nominated its Executive Director Michael Patra to the proposed Monetary Policy Committee (MPC), Governor Raghuram Rajan said here.
The other two MPC members from the RBI will, of course, be the Governor and the Deputy Governor.
Making his opening comments to the media here after announcing the third bi-monthly Monetary Policy Statement, Rajan hoped that the next monetary policy statement will be made by the proposed MPC.
“The committee to select outside members of the MPC has commenced the process. On the RBI’s side, the board has selected Michael Patra to be the RBI Board nominee on the MPC,” Rajan said.
With the formation of the MPC, the government and the RBI will have completed a fundamental institutional reform, which modernises India’s monetary policy framework and builds a platform for strong and sustainable growth, he said.
The central government has set up a committee headed by the Cabinet Secretary to select three non-RBI members of the MPC.
According to Rajan, despite easy liquidity, banks have passed past rate cuts into lending rates only modestly.
“Earlier, some bankers said that it is the lack of liquidity that is holding rates high; now I hear from some that it is fear of the FCNR(B) redemptions that is making them reluctant to cut rates,” he said.
Some new concern may crop up after the FCNR(B) redemptions, Rajan said.
“On our side, having examined our experience with the MCLR (marginal cost of funds based lending rate) framework, we will shortly be suggesting some revisions.”
He said substantial pass through will happen only as corporate credit demand picks up, and public sector banks, strengthened by clean balance sheets, compete for corporate business.
Rajan ended his preliminary comments on a jovial note, saying he or the RBI do not send any emails offering huge sums of money to ordinary citizens even though the central bank prints plenty of it.
He was referring to the emails received by many people promising to transfer a large sum of say Rs 50 lakh to them on payment of a small transaction fee of Rs 20,000 to a specific bank account.
Advising people to delete such mails he said: “While the emails usually contain very convincing reasons why you have been chosen to receive money, ask yourself why I cannot simply deduct Rs 20,000 and send you Rs 49.8 lakh. If you think for a moment, you would not fall prey to such emails.”