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'India not ready for a unified regulatory system for financial sector'

The Reserve Bank of India Governor Bimal Jalan on Monday ruled out India's moving towards a unified regulatory system for the financial sector in the immediate future.

Inaugurating the fifth Asia Pacific Risk and Insurance Association Conference at the Indian Institute of Management in Bangalore, he said though the global trend was towards a unified financial regulatory system, developing economies such as India was not prepared for it.

He said regulatory systems such as the RBI, Securities and Exchange Board of India and the Insurance Regulatory and Development Authority had an independent role to play.

Besides, they were also helping the development process and a unified regulatory system would not be viable.

Such a system would also become huge and unwieldy, he said and referred to the collapse of a financial institution as it had become very huge. (Though he was obviously referring to the Unit Trust of India, he did not name it).

However, Jalan said that study groups could be set up for the purpose so that in the distant future this could become a reality.

IRDA chairman N Rangachary, in his address earlier, referred to the world moving towards a unified financial regulatory mechanism, and said the winds of change might also have its impact on India.

Jalan said that the country was deliberately implementing the reform process at a slow pace so that it did not meet with the same fate like that of the East Asian and Latin American countries.

Admitting that the recessionary trends in the manufacturing sector had led to a slower growth rate of 5.5 per cent, he said this had not affected the economy badly. The increase in the consumer price index was only 3 per cent during the last 18 months despite a surge in oil prices.

He said the current buffer stock of foodgrains was enough to feed the country for two to three years in the event of a drought and the huge foreign exchange reserves would act as insurance for any eventuality.

Jalan said despite the industrial downturn, the strength of the country's economy lay in its asset management. He expressed confidence that India would emerge as one of the fastest growing economies of the world with a growth rate of seven to eight per cent.

By the year 2025, India would be the third largest economy of the world after the United States and China, he said.

UNI

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