In the U.A.E. we were the least-regulated environment in the region, and over time we are seeing more and more regulation coming in. On the other hand, a central bank can overregulate and choke the economy, and then we will have a dead banking industry.
Banks are concerned the central bank is imposing too many regulations. If the trend continues, we'll swing to heavy regulation. We need to have balanced regulation to encourage the economy.
The Central Bank should have a permanent window for discounting high quality securities where banks could go and discount these. It gives peace of mind to the banks. In the absence of this facility, what banks tend to do is to keep a liquidity cushion for emergency requirements. This is a very expensive way of managing liquidity.
The job of the Central Bank is to worry.
History proves... that a smart central bank can protect the economy and the financial sector from the nastier side effects of a stock market collapse.
The central bank needs to be able to make policy without short term political concerns.
The more guidance a central bank can provide the public about how policy is likely to evolve the greater the chance that market participants will make appropriate inferences.
At the most basic level, a central bank must be clear and open about its actions and operations, particularly when they involve the deployment of public funds.
In a mature economy like India's, which is becoming modern and a financially-oriented economy, an independent central bank, responsible central bank, is really central to success.
Most of the policies that support robust economic growth in the long run are outside the province of the central bank.
