Difficult to put a time-frame on monetary transmission post a policy rate cut

government to address?

The first issue is that food supply has to be improved,especially in protein foods. Similarly food distribution and the entire supply chain will have to improve. The second issue is infrastructure,particularly power and coal linkages.

After Fridays policy initiatives,how much of transmission do you expect leading to lower interest rates?

We cant put a number on this. We make policy adjustments,and banks respond continuously over the time. Its difficult to put a time-frame on this. Its necessary that deposits are there and savings are mobilised. There is a risk that if banks reduce deposit rates,people will go to more of these informal schemes.

Indian banks dont participate in big global transactions meaningfully yet. What are your thoughts

on this?

We will raise this issue in the discussion paper on the structure of the banking system in India. Whether they should be encouraged to go for consolidation or grow inorganically? Whats the view on a global bank around the world? How large a bank should be in order to be a global bank? These issues are not clear. We will raise issue there and generate some debate on that. Its not straight forward clarity whether a large bank is necessarily good.

Theres a view that tight monetary policy and slow easing will keep interest rates high,thus enabling the government to attract more capital inflows and finance current account deficit. Do you agree with this?

Its not very clear. Theres a textbook view that when interest rate differential is large you get more capital flows. But recent experiences in India and around the world show that its not necessarily true. Sometimes a reducing interest rate attracts more inflows.

The RBI has taken some measures to curb gold

imports. Do you think those are enough?

We have to strike a balance. People borrow money against gold. Borrowing against gold is lifeline for millions of households. At the same time we dont want innocent people to be short-changed by the system.

How has been the interest for new banking licences?

People has been preparing for this in the last two years. We cant make any inference from their behaviour in

the last two months. They have been raising hundreds of questions. People are going to apply in the last two weeks.