Is RBI's report all about P-notes; what do experts say?

Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS MoF stance on P-Notes positive: JPMorgan Govt likely to widen scope of participatory notes How's Dalal Street reading RBI's report on convertibility? RBI moots drastic changes for Indian financial system Nifty BSE | NSE 29/05/12 Are Mutual Funds betting on Nifty?

For instance, a point on which I have dissented is on freedom for non-residents to invest in the rupee bond market, both G-Sec and corporate. I think that is a very major issue. But the one, which has caught the attention, is P-Note mainly because the issue is directly related to what happens in the stock market.

 

Q: Do you also get a sense from these committee reports that Reserve Bank of India probably is dragging its feet in terms of reforms in the banking system? It seems suggest that we do not want foreign banks just yet, let's see what we can do internally first and then come to the issue of foreign banks and giving them greater access. Is that the feeling, which comes out?

 

Malik: Not from this particular committee report. Do not forget banking sector liberalisation was not necessarily one of the key points that this committee had to dwell upon.

 

But RBI has already come out with its banking sector reform plan. It has clearly disappointed a lot of people that it was moving a lot slower than what a lot of investors would have thought.

 

One thing perhaps to be said in the RBI's favour is the state of some of the state banks. At the end of the day, it is always a Central Bank that's left holding a lemon, if something goes wrong.

 

From that perspective, it has to have a fairly conservative approach. Having said that I think both the RBI and the government need to reach a consensus as to how best can they move forward in a much more accelerated manner.

 

At least on the banking sector side with roadmap already out there, it is difficult for me to think why the RBI all of a sudden would revise that and make a much faster progress on that front.

 

So on lots of these issues, the CAC convertibility report was a good case in point. I do not think markets should have expected anything table pounding. I do think there are some valid positive recommendations that have come out, which clearly have been sidelined because of the whole P-Notes issues, which was unfortunate but there was really no need to expect a table thumping recommendation.