Indian central bank chief stressed the need for trade integration among South Asian countries for a sustainable economic growth in the region, but expressed his reservation about financial integration. ‘The trade integration is undeniably beneficial, but financial integration has both, benefits and risks, at our stage of development,’ Reserve Bank of India governor YV Reddy told a business audience in Dhaka on May 17. Elaborating, he said capital can easily reverse its direction, which becomes difficult for monetary watchdogs to identify its rules of origin.

Reddy was lecturing at a programme organised by Metropolitan Chamber of Commerce and Industry at its conference room. He underlined the need for greater harmonization of monetary policies, especially through staff exchange and exchange of information, among South Asian economies, which have greater monetary linkages. Sound monetary policies can help South Asian countries stabilize commodity and financial markets, and use available financial resources for efficient growth of the region.

Identifying South Asia as one of the emerging and very dynamic economic hubs, the Indian central bank governor said such progress was mainly driven by the private sector, domestic entrepreneurship, domestic investment and consumption demand. He said the average economic growth rate of India in the last four years is 8.6 per cent per annum. Metropolitan chamber president Latifur Rahman underlined the need for integrating regional financial sector effectively into global financial system.

He said the financial sector in South Asia suffers from high non-performing assets, high interest rate and underdeveloped capital market.

In his welcoming speech, Latifur Rahman, president of Metropolitan Chamber of Commerce and Industry (MCCI), said, the banking and financial sector of South Asia suffers from huge non-performing assets, high interest rate, existence of liquidity overhang and underdeveloped capital market (except India and Pakistan). “We often talk about connectivity in terms of trade, transportation and cultural exchange, but without monetary cooperation much of this will remain constrained,” added Latifur Rahman. Besides, there is a need for a greater mandate to SAARC Finance committee, which is an organisation of governors of central banks and secretaries of the member-countries of the regional forum, he said.

Among others Mahbubur Rahman, president of International Chamber of Commerce -Bangladesh (ICC-B), M Syeduzzaman, chairman of Bank Asia Ltd and a former finance minister, C K Hyder, secretary general of MCCI, and Mohammad A (Rumi) Ali, a member of Brac Bank Board of Directors and former deputy governor of Bangladesh Bank, were also present at the meeting.