Chennai, July 4 (IANS) The Reserve Bank of India does not have any target for rupee level but will use all the instruments it has to reduce volatility, RBI Governor D. Subbarao said Thursday.
He also said the bank's monetary policy transmission is not agile as the commercial banks are reluctant to pass on the benefit of interest rate reduction to borrowers and not all applicants will get a banking licence.
Speaking to reporters here after attending the bank's board meeting, Subbarao said the bank has no exchange rate target but would use all the instruments it has to reduce the Indian rupee's volatility.
The Indian rupee fell to over Rs.60 to the US dollar recently.
"I cannot say anything more than standard policy of RBI, we employ instruments which are available to us in order to manage volatility. We don't have exchange rate or target plan, we try to manage the currency movement by using all the instruments," Subbarao said.
Asked about the applications for banking licence, Subbarao said there are no definite numbers as to the new players and not all applicants will get a licence.
When asked about the conflict of interest in the case of Aditya Birla Nuvo's application as its chairman Kumarmangalam Birla is also on the RBI's board, Subbarao said the group applying for the banking licence is a recent development while Birla has been on the bank's board for the past six years.
He said the matter will be discussed with the government.
Subbarao said the RBI will evaluate the applications over the next three/four months and then another committee will study and decide on the applications.
About increasing non-performing assets (NPA) for the banks and restructuring of bad loans as areas of concern, he said all the banks were adequately capitalised to meet the increasing NPAs.
Subbarao said there was a decline in the NPA figures between December 2012 and March 2013.
He said the RBI is not sure whether this declining trend would continue.
On Finance Minister P. Chidambaram's observation that the RBI, apart form focusing on reining in inflation, should also look at economic growth and job creation, Subbarao said the central bank is doing its best to balance financial stability and industrial growth.
He said the RBI expects transmission of monetary when it reduces the policy rates with banks passing on the benefits to their clients. He said the objective of the monetary policy is price stability, financial stability and growth.
Ruling out offering interest on Cash Reserve Ratio (CRR), Subbarao said the decision to increase of reduce the CRR is determined by the monetary policy which in turn depends on the liquidity situation.
On the issue of fraudulent financial schemes, he said it is the state governments' responsibility to check such schemes while RBI officials will study as to why the villagers get attracted towards such schemes.
He said the central bank has identified two districts in Tamil Nadu to undertake an exploratory study to understand people stream of income and expenditure and how these schemes are working, so that corrective action can be taken if needed.
Agreeing that the counterfeit currency is a problem, Subbarao asked the banks to identify and report, and urged the public to surrender such notes.