Rajeev Chandrasekhar's official website - Member of Parliament

GOVERNMENT OF INDIA
Ministry of Finance
DEPARTMENT OF ECONOMIC AFFAIRS

RAJYA SABHA
UNSTARRED QUESTION NO. 816
TO BE ANSWERED ON NOVEMBER 16, 2010 / KARTIKA 25, 1932 (SAKA)
Review Of Operating Procedure Of Monetary Policy

 

816. SHRI RAJEEV CHANDRASEKHAR:
Will the Minister of FINANCE be pleased to state:

  1. whether the Reserve Bank of India (RBI) has constituted a Working Group to review the current operating procedure of Monetary Policy as transmission of the Policy to the rest of the system remains imperfect;
  2. if so, the details thereof and the reasons therefor;
  3. the composition of the Working Group; and
  4. the role and functions of the Working Group?

ANSWER
MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI NAMO NARAIN MEENA)

(a) to (d): The Reserve Bank of India (RBI) has constituted a Working Group to review the current operating procedure of monetary policy, including the liquidity adjustment facility. The Working Group has been set up in view of India's increasing integration with the global economy, large volatility in capital flows and sharp fluctuations in government cash balances that has posed several challenges to liquidity management by the RBI, particularly in effectively signaling the monetary policy stance. The Working Group is chaired by Executive Director, RBI and have representatives from Indian Banks' Association (IBA), Fixed Income Money Market and Derivatives Association of India (FIMMDA), concerned departments of the RBI and external experts. The terms of reference of the Working Group are annexed.

ANNEXURE
ANNEXURE TO PART (a) to (d) OF THE RAJYA SABHA UNSTARRED QUESTION NO. 816 TO BE ANSWERED ON THE 16TH NOVEMBER, 2010 REGARDING REVIEW OF OPERATING PROCEDURE OF MONETARY POLICY

Terms of Reference of the Working Group

The terms of reference of the Working Group constituted, by the Reserve Bank of India to review the current operating procedure of monetary policy, including the liquidity adjustment facility are:
(i) to survey the operating procedures of major central banks;
(ii) to review the current operating procedure of monetary policy in India, in particular, the Liquidity Adjustment Facility (LAF);
(iii) to examine the operation of the LAF with regard to:

  1. the width of the corridor
  2. the frequency and timing of auctions
  3. the maturity period of repo and reverse repo operations;

(iv) to assess the role of the Bank Rate;
(v) to examine the role of standing facilities such as the export credit refinance; and
(vi) to suggest changes to the current operating procedure of monetary policy in India in the light
of international practices and domestic experience, with particular reference to:

  1. whether there should be a corridor at all
  2. if so, whether its width should be fixed or variable under specified conditions
  3. if so, what instruments/mechanisms may be necessary to enable the corridor to function efficiently.