A day after global credit rating agency Standard & Poor’s cut India’s sovereign credit outlook to ‘negative’, the Reserve Bank of India (RBI) said the country’s financial system is strong and, sometimes, these ratings are discounted by markets.

RBI deputy governor KC Chakrabarty said the central bank will intervene in the forex market only if there is high volatility in the currency market, and not just because of the ratings. The central bank will come out with its next financial stability report in June, which showcases the country?s financial strength and will reflect the position of the economy.

?Indian financial system is stable and strong and this is our internal assessment. An RBI’s financial stability report will be released in June to understand the position,” Chakrabarty said on the sidelines of a seminar on ?Financial Inclusion: Trends, challenges and policies towards an effective framework for financial inclusion? in Hyderabad.

When asked about the impact of S&P rating to negative, he said, ?Sometimes, what is coming in the rating is discounted by market.? S&P downgraded India’s credit outlook to ‘negative’ and warned of a downgrade if there is no improvement in the fiscal situation and political climate.

?As of now, there is nothing to worry, but we are examining it,?’ he said. He also mentioned that there cannot be high growth without low inflation. ?High inflation is always inimical to growth. This tussle between inflation and growth will continue anywhere in the world,? he added.

Meanwhile, he said that financial inclusion, which has become the ?fashion? word for banks, has to become ?passion? and there is a need to pursue it as a viable business opportunity and not charity.

He said that the country has the most flexible guidelines in the world for business correspondents (BCs). Capitalising on them, banks have to provide a basic account as a fundamental right and have to focus on transactions in newly opened accounts.

He said financial inclusion is perceived more as an obligation than a business opportunity. He said banking connectivity to more than 1,47,535 villages has been achieved by March 2012 from 54,258 villages in 2010.

More than 50 million basic banking accounts have been opened to take the total number of such accounts to more than 100 million, out of which seven million families have been credit linked.

RBI extends UCB purview

To facilitate enhanced priority sector lending, the RBI has decided to increase the exposure of primary urban cooperative banks (UCB) to housing, real estate and commercial real estate loans from 10% of their total assets to an additional 5% for housing loans to individuals up to R15 lakh.

UCBs would, henceforth, be permitted to utilise the additional limit of 5 % of total assets, for grant of housing loans to individuals upto R25 lakh, which is covered under the priority sector.