Centres Of Excellence

To focus on new and emerging areas of research and education, Centres of Excellence have been established within the Institute. These ‘virtual' centres draw on resources from its stakeholders, and interact with them to enhance core competencies

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Faculty

Faculty members at IIMB generate knowledge through cutting-edge research in all functional areas of management that would benefit public and private sector companies, and government and society in general.

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IIMB Management Review

Journal of Indian Institute of Management Bangalore

IIM Bangalore offers Degree-Granting Programmes, a Diploma Programme, Certificate Programmes and Executive Education Programmes and specialised courses in areas such as entrepreneurship and public policy.

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About IIMB

The Indian Institute of Management Bangalore (IIMB) believes in building leaders through holistic, transformative and innovative education

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Reorienting India’s Financial System

Vol 24, No 2; Article by Vivek Moorthy; June 2012

Interview with Dr Duvvuri Subbarao, Governor, Reserve Bank of India

India's slowing growth coupled with persisting high inflation has exacerbated the usual policy dilemmas faced by the Reserve Bank of India (RBI). Although the RBI has taken significant steps this year to enhance liquidity in the financial system and revive growth, the associated risks that inflation will remain high are substantial. This article evaluates the RBI's monetary policies and related policies that have contributed to these recent economic outcomes. It first discusses whether, under prevailing price controls for some critical items, estimates of India's potential GDP growth rate have been realistic. Secondly, it critiques the pattern of India's financial liberalisation, which has been skewed towards the external sector at the expense of domestic financial markets. In particular, the sign of a viable healthy financial system is that interest rates incorporate inflation expectations, so as to give depositors a positive real return, as per the well known Fisher equation. However the Indian bond market does not meet this criterion. With expected inflation now over 10%, bond yields by the Fisher equation should be well above 10%. However, the benchmark ten year Government Security (G-Sec) yield has rarely crossed 8.5% this year. Although the RBI has implemented various policies to improve the corporate bond market, these cannot succeed as long as the underlying Government bond market is hampered in its functioning in various ways. The article then goes on to examine non market borrowing e specifically, RBI Committee recommendations that the administered interest rates on Small Savings and

Provident Funds be linked to G-Sec yields. It points out that if these rates had been instead benchmarked to inflation, the ensuing higher levels would reduce prevailing distortions from unduly low (GSec) yields on market borrowing. In a detailed interview with Professor Vivek Moorthy, Dr. Duvvuri Subbarao, Governor, RBI discusses the above issues and also responds to queries. They also discuss policy options to alleviate the strains in the money market in recent weeks, due to abnormally high borrowing by banks.