Usha Thorat, head of RBI’s recently set Centre for Advanced Financial Research and Learning says that while most countries come armed with financial research on the G20 summits, India clearly lags behind. “There is a real dearth of research in the financial sector issues,” says Thorat. The new section of the central bank is set to create a “global hub for both research and learning in banking and finance.”
Thorat, who also heads the NBFC rules committee, discloses that the report that will be submitted by the end of June is likely to manage regulatory arbitrage and regulatory overlaps.
Below is a verbatim transcript of Usha Thorat’s interview with CNBC-TV18.
Q: What is the term of reference of this institution? What are you planning to achieve?
A: Let’s look at the name itself - the Centre for Advanced Financial Research and Learning - so it is really expected to become global hub for both research and learning in banking and finance, which is the broad objective of this center.
Q: What you do? You hold training courses for bankers? What is your core strength? Will you be having researchers? Will you be having teachers, will you be having bankers?
A: Basically, we are looking at is the two basic activities — research and learning. When we look at research, we want to do high quality research. However the research needs be useful to bankers, regulators, supervisors, policy makers and governments, hence, needs to have applicability. In general, the financial sector is under researched in India. The kind of data that you need in a manipulable form is not available. There is a certain amount of lack of research and this reflects in all our participation in the global forum. When you are going on to the G20 or you are going to the Financial Stability Board or the Basel Committee, most of the countries come with research backing them. There is a real dearth of research in the financial sector issues.
Q: Coming to the more operable part, you have to have Basel II, Basel III norms. Will you be training RBI staff itself into outdoor?
A: It will encompass both research and learning. We would have a set of programmes for training RBI staff and the banks own management as also the banks; we are not planning to go down in the bank, as long as we sensitize the top and senior management to the needs of risk management and Basel III.
Hence, we are focusing initially on financial risk management, financial regulation, and financial markets as the areas of priority. We will be holding programmes for senior management of the banks and courses may be for our own people to be able to move over to more advanced methods under the Basel II and Basel III
Q: You are also still one foot in the RBI in terms of heading the NBFC rules committee. Are you all close to submitting report?
A: We are close to submitting our report by end of June as the governor stated in his monitory policy statement. It has been wide range of issues that have been referred to us and we have had the benefit of traction with the market participants as well. It is quite a challenging task and it is quite complicated as well, because essentially the focus is firstly why do you regulate? How do you regulate and supervise and not miss things out and how do you not spend too much time on what you really don’t need to be doing? So, it is a kind of ensuring that supervisory resources are optimized. At the same time, you don’t want to be doing things you need not be doing.
Q: Will the term of reference or will the end result be that you have to come to terms with the fact that NBFCs you can’t manage with light touch regulation anymore, there will be more heavy regulation?
A: It has to be in the context of what has been the experience. It has got to do what is the international experience; it also has to deal with regulatory arbitrage and regulatory overlaps. Hence, we need to be able to handle all of this while looking at the eventual outcome.
Moneycontrol
