Financial regulators across the world, including the Reserve Bank of India (RBI), need to go beyond monitoring inflation and be vigilant to meet challenges like the US subprime mortgage crisis.
The apex bank has been able to tide over many crisis in the past to maintain financial stability in the country, Rakesh Mohan, deputy governor, RBI, said on Friday.
Addressing the 38th annual general meeting of the Indo-American Chamber of Commerce, in Mumbai, Mohan said, ?Given the speed at which the financial markets? contingencies are taking place, you?ve to be very much cautious.?
Subprime crisis issue is a symptom rather than a cause. The recent crisis has brought the need of a strong surveillance, he said.
Referring to the various measures taken by the RBI in the recent past, Mohan said, ?RBI has taken all the steps by asking the domestic as well as foreign banks and even non-banks to go for risk management system in a serious way.?
Also, a continuous vigilance, by central banks across the world, must be maintained on banks? credit quality. In fact good growth and financial stability, both are a matter for central banks.
The RBI has been able to bring about stability in the domestic financial system through a combination of monetary and economic policies, he said.
Mohan suggested the need for blending the traditional approach towards the monetary policy with the non-traditional ones.
Striking a stringent note on the upward global food prices, the deputy governor said that rising food prices globally have complicated the task of the central banks across the globe.