Kochi, June 7: There was nothing inherently wrong in Parliament deciding on a rate of inflation desirable for the country's economy when full convertibility comes into operation as per the Tarapore commitee report, Reserve Bank of India deputy governor Jagdish Capoor said.

Speaking to newspersons after inaugurating Union Bank of India's eighth specialised overseas branch in the country here, Capoor said Parliament would be fixing a desirable rate of inflation, which was just a goal, while it was for the Reserve Bank to see that the goal was achieved.

``It need not be seen as something very wrong if Parliament decides on a desirable rate of inflation,'' he added.

Capoor did not foresee any unhealthy drain of the country's forex reserves once full convertibility was introduced. However, he said ``we have to prepare ourselves for all eventualities. It was certain that full convertibility would open the doors for greater competition in the banking industry''.

He said there was no question of allowing full convertibiltiy on a selective basis. ``It would be across the board applicable to the entire banking sector,'' he added.

``Efficiency is going to be the key word in such a competitive milieu and not the size of a bank,'' he said dispelling fears about massive closure of small banks once full convertibility took effect. Most of the Indian banks were gearing themselves to successfully face the challenges ahead, he added.

He said it had been decided to go ahead with the move to get currency notes of small denomination printed abroad to tide over the present scarcity for it in the country. He said the cost of printing currency notes of small denomination was too high in the country and the capacity of the mints was not sufficient to cater to the increasing demand.

The cost of printing a one-rupee currency note was much more than its denominational value, he added. The scarcity of small denominational currency was bound to last for some more time.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.