Need to minimise deposit mop-ups by NBFCs: Subbarao

In the light of deposit mop-up by non-banking finance corporations (NBFCs) Reserve Bank of India Governor D Subbarao admitted there was a dire need to tighten regulations for financial stability and consumer protection. He stressed that collection of deposits outside the banking space should be minimised and finally eliminated.

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Talking about mushrooming ponzi schemes that have duped many investors in recent times the RBI boss reminded that its jurisdiction was limited to NBFCs, but admitted there was a need to tighten regulation to check such schemes. Ponzi scheme is a fraudulent investment scheme where the money being brought in by newer investors is used to pay off older investors.
The Parliamentary Standing Committee on Finance has completed deliberations on ponzi schemes and will submit recommendations to Parliament in the next Monsoon session.  Subbarao, however, pointed out that implementation of existing laws are more important than knee jerk reaction of enacting new laws.
Expecting smooth and non-disruptive transition to Basel III, Subbarao said India banks need additional capital to the tune of Rs 5 lakh crore.
Subbarao said price stability and macroeconomic stability do not guarantee financial stability and no country is an island. That's why five years after Lehman's fall, the crisis continues to stay, he said. He acknowledged that it is important to convert lessons from crisis into policies and wished participation of emerging economies in global reform push.
Justifying his priority to tackling inflation, the RBI Governor on Tuesday said he had to listen to the 'silent voices' of millions of poor amid the vociferous demand from several quarters for a cut in interest rates to boost sagging industrial production. Also Read: Call on new bank licenses post RBI scrutiny by Oct: Takru