ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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A Performance Appraisal of the Inflation Targeting Regime

The recently published Report on Currency and Finance, 2020–21 of the Reserve Bank of India reviewed the performance of the flexible inflation targeting regime in India. In the light of stylised facts, cross-country experience, and detailed econometric results, the report seemed to suggest that despite several shocks (like demonetisation or introduction of the goods and services tax), a combination of good policy and luck have worked in favour of the success of the FIT regime in India. Going forward, while advocating some nuanced, subtle changes in the operation and administration of the FIT regime, the report called for its continuation as a strategy of monetary policy in India.

Bad Bank, Bad Loans and the Indian Banking Mess

This article looks into the reasons for the large non-performing assets of the Indian banks, particularly public sector banks, and the various steps taken by the government and the Reserve Bank of India to tackle the issue of bad debts. It also examines if a bad bank is the magic wand that can...

Government and Its Adaptive Ignorance

Privatisation is no solution to the problems of the banking sector.

Why Corporate Houses Should Not be Allowed to Promote Banks: A Reading List

The new proposal by an RBI Internal Working Group to allow large corporate/industrial houses to float banks poses various risks for the banking sector.

Central Bank Profits in National Accounts

For macroeconomics, the government is divided into the central bank and the treasury. Positive profits recorded by the first are cancelled out as a negative item in the second. However, a debate has been generated by the transfer by the Reserve Bank of India of a record surplus to the coffers of the overnment. The issue is examined in a stock-flow-consistent model. A tension is found to reside in the pledging of profits for advances to banks on the one hand, and reducing the government budget deficit on the other. In the case of India, we conclude that central bank profits are intended to substitute for taxation.

Surging Reserves

Only greater stability and absorptive capacity can ensure productive use of funds.

Inflation Convergence and Anchoring of Expectations in India

Careful research on the inflation targeting regime’s impact on anchoring inflation expectations, as well as an empirical examination of convergence, is used to assess the direction of convergence between core and headline inflation, as well as the efficacy of the expectation channel compared to the aggregate demand channel of monetary transmission. There is evidence of more anchoring, with the Reserve Bank of India communications as well as headline inflation affecting short-run inflation expectations and core inflation dominating in the long run.

Can Payments Banks Succeed?

Recently, the Reserve Bank of India has begun licensing a new kind of retail bank, called payments banks, for the hitherto financially excluded. The regulator’s argument that technological innovation will allow payments banks to achieve a seemingly impossible trilemma of financial inclusion while still being competitive and profitable is examined. The article concludes that amelioration of this trilemma will require the regulatory orientation to fundamentally change, and for the state to provide a kind of public good to all payments banks.

The Judiciary and the Stressed Assets Resolution

When defaulting borrowers are unable to pay their overdue amounts, the matter invariably lands up with the courts for settlement through a court-regulated process of lenders taking possession of assets and their sale. However, recently some borrowers have challenged the resolution scheme designed by the Reserve Bank of India. The outcome of the judiciary-led resolution processes in the past and the recent judicial intervention are examined.

What is the Story of Black Money in India?

Ill-conceived policy and weak laws aid the flow of unaccounted money in India.

On Monetary Economics

Monetary Policy in India: A Modern Macroeconomic Perspective edited by Chetan Ghate and Kenneth M Kletzer, Springer, 2016; pp xiii+652, price not indicated.

How Did Central Bank Independence Become the Norm?

Priests of Prosperity: How Central Bankers Transformed the Postcommunist World by Juliet Johnson, New Delhi: Speaking Tiger, 2016; pp xv+292, ₹995.

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