The G-20 Finance Ministers and central bank governors have prepared a detailed action report ahead of the Group's London summit to restore global growth and reform financial systems to tackle the unprecedented global recession.
Briefing news persons on the working group's report, Reserve Bank Deputy Governor Rakesh Mohan today said that the key priority now was to restore lending by tackling problems in the financial system and provide continued liquidity support, besides recapitalising banks.
Although interest rates have been cut aggressively in many countries, the Group wanted G-20 central banks to maintain expansionary policies using full range of monetary policy instruments including unconventional ones, he said. It, however, wanted these measures to be consistent with price stability while ensuring restoration of growth and long-term fiscal sustainability.
Asserting that the G-20 ministers were committed to deliver the scale of sustained effort necessary to restore growth, the RBI Deputy Governor said that the Group wanted International Monetary Fund to assess the actions taken and the actions required by the central banks.
"Fiscal expansion is providing vital support for growth and jobs. Acting together strengthens the impact and the exceptional policy actions announced so far must be implemented without delay," the report said.
Elaborating on the structural reforms required in the present situation, Mohan said that systemically important financial institutions, markets and instruments should be regulated to ensure discipline in the financial systems.
"Consideration has to be given to the potential systemic risk of a cluster of financial institutions, which are not systemically important on their own," the report said.
