MUMBAI: Monetary regulation of domestic market has become complicated due to globalisation of financial markets, RBI Governor Y V Reddy said on Friday.
"Financial markets are globalised and regulation is national...this creates complication for monetary policy," Reddy said during the Silver Jubilee function of the RBI Archives.
"We don't know the answers but we know there are problems.... future does not lie in our hands, we are at the receiving ends," Reddy said, highlighting the difficulties in regulating the financial market that has become highly globalised.
India has been witnessing a large inflow of foreign capital from around the globe. The apex bank yesterday announced an increase in the cap to Rs 2 lakh crore for the Market Stabilisation Scheme that sucks out excess liquidity due foreign currency flows.
Reddy said that the central banks have to work hard to deal with this "spill-over" of liquidity but it was "a part of life."
On transparency of central banks, Reddy said that there has to be a distinction between transparency and future guidance.
"We analyse and we share the analysis. We also share inference from the analysis...but we focus on responding to evolving situations," he said.
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