The Reserve Bank of India’s top brass began a two-day brainstorming session in Goa today amid global uncertainties flowing from the sovereign debt crisis of the euro zone and fiscal problems of the US besides fears of high prices and a slowdown in domestic growth.
The annual senior management’s conference, being attended by the governor, deputy governors, executive directors, regional directors and chief general managers, has also invited guest speakers from the academic and financial world.
“The deliberations are aimed at improving efficiency, effectiveness and responsiveness of the RBI as an institution,” said a senior central banker. The theme of the seminar is also in line with RBI Governor D Subbarao’s vision of making the bank a knowledge organisation.
The session comes at a time when the country is facing challenges from all quarters: slowing growth, stubborn inflation and weakening of currency. The rupee has depreciated 16 per cent since August 2011 against dollar, as demand for the greenback has strengthened following the euro zone crisis and fears of a global economic slowdown.
Despite the sharp fall of the rupee in the past three-and-a-half months, the central bank is not seen intervening frequently to arrest the fall.
RBI officials maintain that their intervention in the foreign exchange market is merely aimed at curbing volatility. The central bank does not aim for any particular level.
In September, the RBI intervened in the foreign exchange market. That was when it had sold $845 million, after following a hands-off approach for nine months, according to data released last Friday.
The fall in rupee is also expected to fuel inflationary pressure as the country imports nearly two-third of its oil requirement.
Rising prices has also been a challenge for the central bank with headline inflation stayed around the double digit mark for 21 months. Despite a series of rate hike — 13 since March 2010 — inflation is yet to come down. RBI expects inflation to change its trajectory in the later part of the financial year and expects it to be at 7 per cent by end-March. After hiking the policy rate by 375 bps between March 2010 and last month, the central bank indicated a pause as growth threatening to slip below the 8 per cent mark.
