RBI to adopt macro-prudential approach to deal with recession

10 February 2009

The Reserve Bank of India (RBI) is planning to shift from a micro-regulations regime to a macro-prudential approach in a bid to revamp its regulatory stance.

The central bank's policy will focus on cyclicals that will help banks deal with recession.

Speaking at a banking seminar in Mumbai, RBI executive director, Anand Sinha said, ''The policy (approach) needs to be modified from micro prudential to macro-prudential. The work is going on ensure that policies do not reinforce a downturn.''

Sinha said that central banks had adopted the stance across the world since the crisis.

He added that in addition to focusing on counter-cyclical measures, the central bank will also look at issues like compensation policies and the treatment of unregulated entities.

Sinha said that the central bank will continue to maintain ample liquidity in the banking system using both conventional and unconventional tools.