RBI's FY15 agenda: Strengthen, reform, develop financial sector

India's central bank Thursday said its agenda for 2014-15 is to contain consumer price index (CPI) inflation, strengthen banking structure, reform financial markets to deepen and widen them and improving the financial systems' ability to cope with distress.

Outlining its agenda for the current fiscal for the first time, the Reserve Bank of India (RBI), in its annual report, said that high and persistent inflation has become a key risk to the growth outlook and to overall macro-economic stability.

It said it has set out a disinflation path and will work in tandem with the central government in containing inflation.

It said both the supply and demand side approaches are necessary for lowering inflation.

"As such, monetary, fiscal and structural policies have to play complementary roles in containing inflation," the RBI said.

"The Union Budget for 2014-15, by stressing adherence to the fiscal consolidation path and providing direction for addressing supply constraints, will help the Reserve Bank follow the disinflationary path laid out in the January 2014 Monetary Policy Statement, viz., containing CPI inflation to 8 per cent by the beginning of 2015 and 6 per cent by the beginning of 2016," the annual report notes.

As a measure to strengthen the banking structure, the RBI has proposed to review the group exposure norms for banks so as to align them with the revised global standards.

"The tightening of exposure norms will also help in risk mitigation during cyclical downturns as banks' exposure under the framework will be more granular and diversified to a large number of unrelated counterparties rather than being concentrated to a handful of large and related counterparties," says the annual report.

The RBI plans to undertake reforms in financial markets, set up an over the counter (OTC) derivatives trade repository and take several other steps in support of the debt management strategy.

The central bank also said that it would work towards developing the debt market including by rationalising the foreign exchange management.

On improving access to finance and customer protection, the RBI's actionable agenda for 2014-15 would include putting in place the guidelines and operational parameters for a pan-India bill payment system which will facilitate anytime, anywhere system of making bill payments.