Rupee Should Be Like The $///: Jalan

The rupee should become as good a currency as the dollar/yen/pound sterling or the euro and India should be the strongest in external sector, outgoing Reserve Bank of India (RBI) Governor, Bimal Jalan said on Monday.

Jalan, who lays down office on Satuday, averred that foreign exchange was not a constraint at all.

"Strong external position of the country has many dimensions. It gives a sense of security and confidence to the entire country," Jalan said at the annual conference of authorised dealers and chiefs of international banking divisions held on Thursday.

It is important for the central bank, especially in the emerging markets, to be in harmony with the government of the day for economic policy making, he said.

 

"It is important to have shared objectives between the central bank and the government though the instrumentalitites of achieving those objectives may be different," said Jalan, who was recently nominated to the Rajya Sabha.

He acknowledged the whole-hearted support received by the central bank from the government on matters of strategy. The governor emphasised that policies such as prescribing limits on certain transactions were aimed at building a safety net.

Such policies help in times of crisis and they should not be used to make individual transactions difficult. Bankers and policy makers, according to Jalan, should get out of the hangover of the Foreign Exchange Regulation Act.

"While accountability is necessary, it is not necessary to mistrust Indians," he said and added that bankers should implement 'know your customer' principle while entering into transactions but should always give the benefit of doubt to the customer.

Complimenting the market for giving feedback on longer term policies to the RBI, the governor stated that market feedback on longer term policy issues have always helped the central bank in framing policies that are market friendly and can be implemented.

He hoped that India will continue to build transparent, well functioning and forward looking markets.

Vepa Kamesam, deputy governor, urged bankers and their customers to review their unhedged positions and underlined the need for better management of risks.

He highlighted the need for keeping audit trails and market intelligence to guard against possible money laundering transactions which are a major concern among global regulators.

K J Udeshi, deputy governor, cautioned the bankers about the increasing global regulatory concern about money laundering. She urged the bankers to apply 'know your customer" principle to customer transactions especially in Nostro accounts.