RBI chief seeks 'new rules' for cen­tral banks

The Pak Banker - - FRONT PAGE -

In­dia's cen­tral bank chief said "new rules of the game" were needed for mon­e­tary pol­i­cy­mak­ing, ar­gu­ing that greater over­sight was cru­cial in an in­creas­ingly in­te­grated global econ­omy. Re­spected cen­tral banker Raghu­ram Ra­jan pro­posed a traf­fic light-style sys­tem whereby a cen­tral bank's poli­cies could be rated red, or­ange or green de­pend­ing on their level of harm­ful "spillover" ef­fects.

"The in­ter­na­tional com­mu­nity has a choice. We can pre­tend all is well with the global fi­nan­cial non-sys­tem and hope that noth­ing goes spec­tac­u­larly wrong," Ra­jan, gov­er­nor of the Re­serve Bank of In­dia, told an In­ter­na­tional Mon­e­tary Fund con­fer­ence in New Delhi. "Or we can start build­ing a sys­tem for the in­te­grated world of the twenty-first cen­tury," he said. Across the world, cen­tral banks have re­sorted to stark mea­sures in re­cent years in an at­tempt to kick-start growth in their slug­gish economies. The Bank of Ja­pan and oth­ers have cut in­ter­est rates below zero while the Euro­pean Cen­tral Bank has steadily ex­panded its vast quan­ti­ta­tive eas­ing pro­gramme, where it buys bonds with money that it creates elec­tron­i­cally.

Ra­jan said the im­pact of th­ese "un­con­ven­tional" poli­cies on trade and cap­i­tal flows out­side their in­di­vid­ual coun­tries should be over­seen by mul­ti­lat­eral bod­ies such as the IMF.

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