The Reserve Bank of India’s monetary policy announcement for the first half of this fiscal year is very much on the expected lines. There are no dramatic pronouncements on the macroeconomic front – the governor had earlier already ruled out any reduction in the Bank rate or the cash reserve ratio – no big bang reforms, no new announcements on the recent stock market/banking fraud. Nothing to unnerve the markets or unsettle the economy. Instead the policy carries forward the overall reform agenda – albeit in fits and starts – even as it tries to plug the loopholes in the system that have come to light in the context of the latest scam. However, market observers looking to find some admission of regulatory lapse on the part of the RBI are likely to be disappointed. Apart from a brief mention that the policy is being “presented at a time when serious lacunae have emerged in the functioning of certain segments of the financial system”, there is no elaboration of whether the central bank’s own supervisory lapses – of the clearing house or of urban cooperative banks/ commercial banks – contributed to the market operators’ shenanigans.
