It is govt's job to check money laundering: RBI

Bringing down inflation without hurting growth a challenge, reiterates Subbarao

Amid allegations of money laundering against banks and insurance companies, Reserve Bank of India governor D Subbarao today said it was the responsibility of the government and tax authorities to check such activities.

“RBI is not directly involved...Even banks are not directly responsible. They are not expected to inquire about the source of income. It is for government and tax authorities to check money laundering," he said, while addressing students and academicians as part of the platinum jubilee celebration of the Jammu & Kashmir Bank.

The RBI chief further said there was no conclusive evidence of money laundering in the expose by Cobrapost, the portal which has, on the basis of videotaped evidence,  alleged wrongdoing on the part of 23 public and private sector banks and insurance companies.

On challenges before RBI, he said the biggest one was bringing down inflation without hurting growth. The central bank recently reduced the short-term lending rate by 0.25 per cent to promote growth but industry was not satisfied.

RBI had raised rates 13 times between March 2010 and October 2011, from 4.75 to 8.50 per cent, to control inflation. Wholesale price index inflation was 10.88 per cent in March 2010 and was 5.96 per cent in March this year. Meanwhile, growth slid from 8.6 per cent in the March 2010 quarter to 4.5 per cent in the December 2012 one. RBI has said it expected inflation to remain around 5.5 per cent in 2013-14.

Subbarao also said the central bank was planning to soon introduce plastic currency notes. It and the government had earlier decided to introduce a billion pieces of Rs 10 notes in polymer/plastic on a field trial basis in Kochi, Mysore, Jaipur, Bhubaneswar and Shimla. It was being done to elongate the life of bank notes, especially those of lower denomination.

On Islamic banking, Subbarao said the concept was not consistent with Indian banking regulations.