Banks must behave responsibly, says Chakrabarty

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Banks and institutions cannot ‘behave in an irresponsible manner’ and expect the Reserve Bank alone to ensure smooth functioning of the financial markets, RBI Deputy Governor K.C. Chakrabarty said on Friday.

"Market players cannot behave in an irresponsible manner and say that it is RBI's job to provide (adequate liquidity). So, every financial institution has to manage its asset and liability in a prudential manner," he said on the sidelines of IIMA-Citi Financial Literacy Symposium here.

Chakrabarty, known for his straight talk, had pulled up banks on Thursday stating they had misguided investors by not giving them a correct picture about their non-performing assets (NPAs).

"You (banks) have misguided your investors for the past five years by not giving your proper NPA figures...Should not the regulator (SEBI) who is dealing with listing, take action against the banks?" he had questioned.

In his interaction with reporters on Friday, Chakrabarty said while the RBI is committed to maintaining adequate liquidity in the system, ‘but we have to understand this commitment is not one way’.

On rupee movement, he said RBI will continue to take ‘best possible’ steps to contain its slide.

"Whatever best possible...what Reserve Bank needs to do, Reserve Bank will continue to do that," he said.

In the last one year, Indian currency has fallen nearly 25 per cent against dollar.

Asked if there is wrong doing in the forex market, Chakrabarty said, "As the supervisory authority, nothing has come to our notice that there is a manipulation."

With regard to new global risk norms for banks, Basel III, he said, "Our problem is that capital standards are being tightened when our penetration of the market is low. We need to have a higher growth rate and that's why we need to increase the credit growth," he added.

Asked if retirement of overseas debt by Indian corporates could pose any systemic risk, he said, "redemption (of foreign currency convertible bonds) is not a problem of RBI...it is a problem of whether institutions have resources to pay back or not. It is not a big issue."