Central banks cannot fix economies by themselves and the governments too need to act from the fiscal side and both monetary and fiscal policies have to act in harmony
Mumbai: Reserve Bank of India (RBI) Governor D Subbarao has said there is a need to preserve the independence of central banks as their mandate has expanded in recent times, reports PTI.
"The issue of monetary policy independence has acquired greater potency following the expansion of mandates of central banks and their more explicit pursuit of real sector targets such as growth and unemployment," he said.
Subbarao cited Japan, where there is political pressure on the Bank of Japan to adopt a higher inflation target so as to create more room for growth stimulus, and said the case is "by no means an exception".
His comments come weeks ahead of the RBI's third quarter policy review scheduled for 29th January in which it might go for a cut in interest rates.
Subbarao said government and RBI need to act in harmony as the central banks on their own cannot fix economic woes.
"Central banks cannot fix economies by themselves. Governments need to act too from the fiscal side and monetary and fiscal policies have to act in harmony," Subbarao said.
Welcoming Nobel laureate Joseph Stiglitz at the CD Deshmukh Memorial Lecture, he said the monetary and fiscal policies should "act in harmony" to achieve common goals.
The comment comes in the backdrop of growing instances of apparent divergent views between the RBI and the Finance Ministry on a string of issues, including lowering interest rates and issuance of new bank licences.
The RBI had not lowered interest rates despite nudging to do so by Finance and Commerce Ministries. The central bank did not initiate the process of issuing bank licences despite assurance from Finance Minister P Chidambaram that government would amend the Banking Act in time.
Although PNB provides services to MetLife India as a distribution agent, the share of MetLife India in the business of life insurance is relatively insignificant and is not likely to raise any adverse effect on competition in India says CCI
New Delhi: Fair trade regulator Competition Commission of India (CCI) has approved 30% stake purchase by state-owned Punjab National Bank (PNB) in MetLife India Insurance Company, reports PTI.
CCI said the deal would not have any adverse impact on the competition scenario.
In its order on 26th December, CCI noted that operations of PNB and MetLife India are not similar or identical.
"Although PNB provides services to MetLife India as a distribution agent, the share of MetLife India in the business of life insurance is relatively insignificant and is not likely to raise any adverse effect on competition in India," CCI said.
In 2011, PNB had announced picking up of 30% stake or about 60.38 crore shares in MetLife India for an undisclosed amount.
Besides, the two entities had reached an agreement following which PNB is acting as an agent of MetLife India for the distribution of its insurance products.
MetLife India is a joint venture between MetLife International (an affiliate of US-based MetLife Inc) and group of Indian investors.
Both PNB and MetLife India had approached the fair trade regulator for approval on 7 December 2012.
According to Nobel laureate Joseph Stiglitz the real problem in the financial sector are issues of conflict of interests and when you have corporates opening their own banks, you are opening a venue for conflict of interests
Mumbai: Nobel laureate Joseph Stiglitz has said corporates should not be allowed to enter banking space as it has the potential to create conflict of interests, reports PTI.
"I think, the real problem in the financial sector are issues of conflict of interests. And when you have corporates opening their own banks, you are opening a venue for conflict of interests," Stiglitz said replying to a question on new banking licences expected to be issued by the Reserve Bank of India (RBI) and interest shown by the corporates for the same.
Stiglitz drew parallels with the US scenario, specifically to the one concerning rating agencies to highlight the possibility of conflict of interest.
"You can only hope that you can monitor them and we hope that credit rating agencies do their jobs too," he said.
Stiglitz was in the city for delivering the CD Deshmukh Memorial Lecture organised by the Reserve Bank of India.
The Parliament has recently passed amendments to banking laws, which pave the way for the entry of new players into the arena.
A slew of corporates have evinced interest in entering the fray and ball is in the court of RBI, which is yet to come up with final guidelines regarding the eligibility criteria.
He also said the argument of bringing 'economies of scale' by giving licences to corporates did not hold water.
"The dangers of conflict of interest outweigh any economies of scale that I can bring up," Stiglitz said.
Drawing parallel between the debate in the western world regarding the conflict of interest with respect to separation of investment banking and pure banking operations, the world renowned economist also said that a Chinese wall cannot be created between the two.
Referring to management of banking regulations, he said the RBI has done a commendable job both in avoiding the crisis as well as during the last four years since the crisis set in.