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RBI moots setting up of advisory board, shedding retail biz

Reserve Bank of India on Wednesday asked the government to explore possibilities of setting up an advisory board for evolving best practices in the discharge of its duties as banker to both central and state governments.

The central bank may also have to consider shedding retail banking business to maintain only government's accounts, Deputy Governor of RBI, Y B Reddy, said at a seminar in New Delhi.

"In view of the enormous work of the government and complexities and other inter-linkages between the central and state governments and the banking system, it may be possible to explore the setting up of an advisory board," Reddy said in a speech read out at the seminar organised by Indian Civil Accounts Organisation.

He said the board could meet quarterly for evolving best practices in the overall interest of discharging the RBI's duties as banker to governments.

"This arrangement will be analogous to the Cash and Debt Management Group in which the Government of India and RBI are involved," he said.

Reddy said RBI may also have to consider shedding retail banking business for ensuring that it maintained only the principal accounts of the governments.

"RBI, being a central bank, for achieving the functional focus, may have to consider in due course, shedding of retail banking in relation to governments in favour of agency banks, with a view to ensuring that in the long run, the bank will maintain only the principal accounts of the governments, leaving the day-to-day business to the commercial banks functioning as agents," he said.

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