It's govt's job to check money laundering: Subbarao

The central bank governor also says that bringing down inflation without hurting growth is a challenge

Amid allegations of money laundering against banks and insurance companies by an online portal, Reserve Bank Governor D Subbarao today said it was the responsibility of the government and tax authorities to check such activities.

"RBI is not directly involved... Even banks are not directly responsible. They are not expected to inquire about the source of income. It is for government and tax authorities to check money laundering," he said while addressing students and academicians as part of the Platinum Jubilee celebrations of Jammu & Kashmir Bank.


The RBI chief further said there was no conclusive evidence of money laundering in the expose of Cobrapost, the portal which has alleged wrong doing on the part of 23 public and private sector banks and insurance companies.

On challenges before the Reserve Bank of India (RBI), he said the biggest one was bringing down inflation without hurting growth.

The central bank has recently reduced short-term lending rate by 0.25% to promote growth, but the industry was not satisfied.

RBI had hiked rates 13 times starting from March 2010 to October 2011. Rates were hike 375 basis points from 4.75 to 8.50% in order to control inflation. Inflation has been off late coming near to RBI's  comfort zone of 5%.

Wholesale price index inflation was hovering in double digits at 10.88% in March 2010 before coming down 5.96% in March 2013. Meanwhile growth slided from 8.6% in March 2010 quarter to 4.5% in December 2012 quarter. RBI has expected inflation to remain rangebound at 5.5% in 2013-14.

Subbarao also said that the central bank was planning to introduce plastic currency notes soon.

The RBI and government had earlier decided to introduce one billion pieces of Rs 10 notes in polymer/plastic on a field trial basis in Kochi, Mysore, Jaipur, Bhubneswar and Shimla.

It was being done to elongate the life of bank notes, especially the ones with lower denominations.

Referring to Islamic banking, Subbarao said that the concept in not consistent with Indian banking regulations
Source:http://www.business-standard.com/article/economy-policy/it-s-govt-s-job-to-check-money-laundering-subbarao-113050800993_1.html