Push to finance infrastructure should not override financial stability: Rajan

The 12th five year plan (2012-17) envisions $1 trillion investment in infrastructure sector

Updated - November 16, 2021 05:04 pm IST

Published - April 02, 2015 02:59 pm IST - Mumbai

The required national push to finance infrastructure should not override financial stability, which is key to national security, Reserve Bank of India (RBI) Governor Raghuram Rajan said here on Thursday.“The nation has enormous financing needs in infrastructure, and far too many of our banks already have too much exposure. Big corporate infrastructure players have also taken too much debt. Going forward, we need to develop new sources of risk capital so that our infrastructure needs can be financed with moderate amount of debt, even as we help the system deleverage,” Dr. Rajan said at a function, organised by the RBI to celebrate the its 80th anniversary where Prime Minister Narendra Modi was the chief guest.

He said India needed deep markets to absorb risks that stayed too often in banks or in corporations.

“Here too our track record has been strong. Though many developing country governments are forced to borrow only in foreign currency, the RBI has fostered a liquid rupee government bond market, where the government today is able to contemplate issuing 40-year bonds. The rupee is truly becoming international as foreign institutions queue up to issue rupee denominated bonds,” he said

Dr. Rajan said new products supported by the RBI, such as the recently introduced interest rate futures contract, were doing a roaring business on exchanges.

We need to develop new sources of risk capital so that our infrastructure needs can be financed with moderate amount of debt

He said now technology was playing a major role in the banking sector and some banks were even allowing customers to do all their banking transactions on a mobile phone, without entering a branch or touching a pen.

“Our intent is to create an ownership neutral, institution neutral, technology agnostic level competitive arena. For example, technologies enabling touch-and-go payments will find use even as banks focus on acquiring and analysing information and reducing transactions costs as they compete to extend financial services to all,” he said

The RBI’s state-of-the-art payments system would support technology, even as the RBI strengthened its cyber-supervision and cyber-security, he added.

Stating that the RBI was today respected for the dedication and capability of its people past and present as well as for its integrity, the Governor said “Strong national institutions are hard to build. Therefore, existing ones should be nurtured from the outside, and constantly rejuvenated from the inside, for there are precious few of them. In the 81st year of this great institution let us rededicate it to helping the nation secure prosperity and economic opportunity for all.”

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