With specific reference to prudential norms, RBI is moving towards international benchmarks, in a serious attempt to make the Indian banks more globally competitive. It is asking banks to consolidate their subsidiary balance sheets with their own accounts. Predictably, the foreign exchange market, the government securities market and the money markets didn't react at all to the policy statements. But despite this, the governor is not taking any chances and he has warned banks to maintain continuous vigilance and caution on the inflation front. Banks and other financial institutions should make adequate allowances for unforeseen contingencies in their business plans, and take into account the implications of changes in the monetary and external environment on their operations.
Freedom is the recurrent theme in the policy.
Not any longer. Jalan has introduced another major change in the financial sector landscape. The RBI has agreed to allow financial institutions to turn into commercial banks. Institutions have been demanding that they be allowed to turn into banks. In short, they also need access to short term funds.