Kanungo for more policy nudges to popularise masala bonds

MUMBAI, Aug 26:Further “policy nudges” are
required for increasing the popularity of masala bonds,
Reserve Bank deputy governor BP Kanungo has said.

Addressing the forex dealers at an event in Singapore
on August 10, Kanungo also called for “urgent” efforts to
ensure more coordinated actions among major the economies in
the face of rising trade tension.

He, however, made it clear that it is “premature to
think of de-globalisation”, as globalisation is an
“irreversible process”.

On masala bonds, where local issuers go abroad to
raise money in the rupee, he noted that global investors have
shown a “healthy appetite” for the rupee-denominated assets.

“This trend needs to be given further policy nudges,”
he said, adding these bonds ensure flow of forex and also
protect issuers from exchange risks.

The first transaction of the masala bond was carried
out in 2014 by the World Bank entity IFC for funding
infrastructure projects in the country.

The speech copy posted by the central bank on its
website Monday did not have any specific suggestions on the
possible policy measures.

On trade wars, Kanungo said there does not appear to
be any possibility of quick resolution to the disputes between
the US and China, nor does it seem to escalate and get out of
hand rapidly in near future.

He, however, rued that the row between the two largest
economies is contributing to the global slowdown, and listed a
no-deal Brexit and the ongoing geopolitical tension in the
Gulf as other risks.

Acknowledging that globalisation has brought some
problems and discontent, Kanungo said “wisdom” lies in
addressing the issues rather than opting for disbanding of the
entire process.

“All aspects of our existence including economies,
markets, social interactions, education and so on have become
intertwined,” he said, adding advancements in communication
and technology have speeded up the l globalization process.

Even as growth in developed countries remains
sluggish, India and China, which have been powering global
growth in recent times, are facing “challenges”, he said.

Kanungo said domestic forex markets have been “fairly
stable” in recent months, but added the RBI is forced to
intervene by buying or selling forex to restore orderliness.

“One also needs to bear in mind that country’s forex
reserves are borrowed reserves and not built out of export
surpluses. In as much as it provides a bulwark against sudden
flow reversals, it enhances the country’s ability to cope with
the fallout and indeed, contributes to global stability as
well,” Kanungo said.

The deputy governor also appealed domestic banks to
help popularise a recently launched, web-based platform making
it possible for small businesses to directly place buy or sell
orders on currencies.

He also urged the non-banking participants in the
audience at the Forex Association of India Conference to study
the global forex code developed by the BIS and sign statement
of commitment to the code. (PTI)