Macroeconomic factors key for financial stability: RBI:
Macroeconomic stability is important for preserving stability in the financial system, according to the Reserve Bank of India (RBI). “However refined the financial regulation might be, it cannot compensate for weaknesses in the real economy. Hence, macroeconomic stability characterised by fiscal prudence and sustainable growth with low inflation is important to preserve the overall stability of the financial system,” said RBI’s Executive Director Deepak Mohanty on Saturday. According to Mohanty, the global financial crisis has given a greater macro- prudential orientation to financial regulation and emphasised on better quality capital so as to safeguard financial stability. Banks are currently under stress when it comes to their asset quality. “The current weaknesses in corporate balance sheets, partly due to subdued economic environment, have been feeding into banks’ balance sheets. This trend, if left unchecked, could ultimately impinge on financial stability,” added Mohanty.
§ Soiled Note Dealers See Brisk Biz on RBI Norms
When the central bank last month ordered the pullback of currency notes printed prior to 2005, the idea was taking back soiled notes and keep notes with better security features to reduce counterfeit. But that has brought a new life to a bunch of agents across the country boosting commission rates for those dealing in soiled notes. Beyond July for exchange, those who are carrying such notes have to disclose their identity for exchanging more than 10 pieces of high denomination notes. This has led to some belief that it is a trap to bring out undisclosed income and drives business for the unauthorized dealers. Surging demand has pushed the commission that used to be Rs. 500-600 for exchanging Rs. 1 lakh worth of notes to Rs. 900-1,000 now.
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