Recent financial crisis underscored the dangers of over-financialisation of the real economy.
In a meeting hosted by US India Business Council on Thursday night, the American industry leaders also discussed with Subbarao the need for maintaining 100 per cent foreign ownership of wholly-owned subsidiaries, and transparent priority sector lending norms.
In the wake of ponzi schemes and chit fund scams, Reserve Bank Governor D Subbarao on Wednesday said there is a need to review the regulations governing these sectors and increase surveillance on such entities.
This was the first meeting between the RBI Governor and Chidambaram following his taking over the charge of the Finance Ministry last week.
The RBI said that strong signs of fiscal consolidation are necessary to create a space for lowering policy rate without the risk of resurgent inflation.
Finance Minister Pranab Mukherjee on Friday asserted that India's economy is 'robust' and its growth story is intact, amid fears of another global economic turmoil that sent the world stocks into a tailspin.
Principal Advisor in the Planning Commission and former Chief Statistician of India Pronab Sen did not share RBI's views.
The rupee has declined by about 9 per cent in the past three months and had touched an all time low of 61.21 to a dollar earlier this week.
The central bank cut SLR to 23 per cent from 24 per cent.
The Producer Price Index will be better able to measure the average change over time in the sale prices of domestic goods and services, the Reserve Bank Governor said.
Reserve Bank Governor D Subbarao on Tuesday favoured bifurcation of the posts of chairman and managing director in state-run banks, saying the experience of such a split in the private sector has been satisfactory.
Due to tight liquidity condition, RBI would cut cash reserve ratio.
Monetary policy typically acts with a lag, and price stability therefore has to be viewed in a medium term perspective, Subbarao said in a speech at the South Asian Association for Regional Cooperation Finance Governors' symposium at Kumarakom in Kerala.
Headline inflation was 8.98 per cent for March, while the food inflation was 8.76 per cent for the week ended April 16.
RBI is scheduled to announce the annual credit policy on May 3.
The Reserve Bank of India chief also reviewed the high-level of inflation with the Finance Minister, ahead of the quarterly review of monetary policy next week, amidst expectations of another hike in key interest rates.
The Reserve Bank in its Mid-Term Review of Annual Policy Statement for 2008-09, the Reserve Bank has said that inflation continues to be a matter of concern.
With RBI rate cut, loans are likely to be cheaper.
The Reserve Bank on Friday said the new UPA government, which is slated present the Budget some time in July, should resist pressure for another stimulus as sustained economic recovery would require fiscal consolidation in medium term.
Reserve Bank Governor D Subbarao will, however, not touch the policy rate or the repo, rate at which RBI lends to banks, on October 30 when he unveils the half-yearly monetary policy because headline inflation continues to be elevated at 7-7.5 per cent, the agency said.
Reserve Bank Governor D Subbarao on Friday met Prime Minister Manmohan Singh and is believed to have discussed the state of the economy and initiatives taken by the central bank to arrest the impact of the global financial meltdown on the Indian economy.
Warning that the worst may not be over yet, Reserve Bank Governor D Subbarao has said the global economic recession may not only continue through 2009 but could prolong to the next year as well.
Bankers are likely to urge the Reserve Bank not to hike its key-rates and mandatory cash requirement in its April-policy, as they fear that this would affect their liquidity, resulting in a sharp surge in lending rates.
Reserve Bank Governor D Subbarao on Thursday said the next fiscal is going to be more challenging than the current fiscal as the moderation in India's economic growth is likely to be worse than expected earlier.
RBI intervenes in the foreign exchange market to manage volatility and to prevent disruptions to the macroeconomic situations.
The term of Subbarao as RBI chief ends on September 4, while the next mid-quarter policy review is due on September 18.
Amidst bankers and industry crying foul over RBI's move to squeeze liquidity, Reserve Bank Governor D Subbarao on Friday met Finance Minister P Chidambaram ahead of first quarter policy review next week.
India has 26 public sector banks, 22 private sector banks and 56 regional rural banks.
Subbarao said, short-term as well as medium-term prospects or Indian economy continue to be grim. Fiscal deficit is going to be much higher, the debt burden much larger and the financial sector will be in a worse shape.
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Addressing a Ficci-organised banking summit in Mumbai, he at the same time said that it will take several years for the country's banks to achieve the status of a large global bank.
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