RBI must do active capital a/c management: Rakesh Mohan

The outgoing Reserve Bank of India (RBI) Deputy Governor said the loose monetary policy led to the global financial crisis and that the relative flexibility of the Asia forex rates added to the crisis.

The Deputy Governor, who is due to leave the RBI to take up a position with the Stanford University, said the central bank must do active capital account management.

Capital flows into emerging markets were seen negative in 2009, Mohan said. On the issue of the Indian banking sector, he said he had not seen any banking problem in India. “Non-performing assets have not upped sharply, despite the high credit growth that we saw in 2004-07,” he said, adding that the central bank had ensured a low loan-to-value ratio despite the high loan rise. “The approach to financial reform is gradual but consistent, he added.