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RBI panel to advise on monetary policy

RBI panel to advise on monetary policy
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First Published: Wed, Jun 24 2009. 10 31 PM IST
Updated: Wed, Jun 24 2009. 10 31 PM IST
Mumbai: The Reserve Bank of India (RBI) on Wednesday announced the formation of a technical advisory committee (TAC) to advise it on monetary policy and separately cautioned banks on their credit reporting practices. The committee, which will be headed by RBI governor D. Subbarao, will have a two-year term starting 1 July, and the monetary policy department will be the secretariat to the panel.
TAC will meet quarterly, review macroeconomic and monetary developments and provide advice on the monetary policy stance.
The deputy governor-in-charge of the monetary policy department—a post that is currently vacant—will be the vice-chairman of TAC. Deputy governors Shyamala Gopinath, Usha Thorat and K.C. Chakrabarty will be members
RBI, in a separate statement, also asked banks to ensure that credit reports were provided to customers who asked for one, citing numerous complaints that its February 2008 advisory to do so was not being followed.
Under RBI regulations, any bank customer can access his or her credit report, containing a history of past borrowings and repayment records, from a bank by paying a maximum of Rs50. In April, RBI had granted licenses to four credit information companies to open credit bureaus in the country to track bank customers’ borrowings and repayments.
In its final missive, the central bank also directed banks to strengthen the sharing of information with each other about the status of borrowers using credit facilities from multiple banks.
All banks that have financed a borrower under the so-called “multiple banking” arrangement would have to take coordinated action, based on commonly agreed strategy, against offenders.
This directive comes after the central bank noticed that unscrupulous borrowers enjoying credit facilities under multiple banking arrangement have, after defrauding one of the financing banks, continued to enjoy the same facility with others and in some cases availed of even higher limits. “In certain cases the borrowers used the accounts maintained at other financing banks to siphon off funds fraudulently diverted from the bank on which the fraud was perpetrated. This could be possible due to lack of a formal arrangement for exchange of information among various lending banks,” RBI said.
anita.b@livemint.com
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First Published: Wed, Jun 24 2009. 10 31 PM IST