RBI for tighter financial sector regulations

While India has been less affected by the global crisis than most other countries because of our relatively cautious policies, prudent regulation and effective supervision, India too has to further strengthen regulation at the systemic and institutional levels, make supervision more effective and value adding while improving risk management skills.

India has all the time been an active participant at the global discussions. It is time now to "reflect our point of view in the global debate and adapt the global policies and guidelines to the Indian situation on a dynamic basis," RBI said in a release on its monetary policy stance.

This is more so as the country needs to actively pursue the challenge of financial inclusion.

Over the last several years, RBI said, it has endeavoured to make reforms a consultative and participative endeavour. It is now standard practice for the Reserve Bank to consult stakeholders before policy reviews, seek comments from experts, place draft policy proposals on its website for feedback and to disseminate policies widely. "We will continue to improve these practices."

A task that the Reserve Bank has all along been performing but is now explicitly defined is monitoring and ensuring financial stability.

Global scene: The recently held G-20 summit during 24-25 September 2009 in Pittsburgh, has, among others, decided to make sure that the global regulatory system for banks and other financial firms reins in the excesses that led to the crisis and as such committed to: raise capital standards; implement strong international compensation standards aimed at ending practices that led to excessive risk-taking; improve the over-the-counter (OTC) derivatives market; create more powerful tools to hold large global firms to account for the risks they take; and ensure that standards for large global financial firms are commensurate with the cost of their failure.