The Organization for Economic Cooperation and Development (OECD) on Thursday said the Reserve Bank of India (RBI) needs to keep monetary policy accommodative but also ensure that there is good transmission of rates.
In an interview to CNBC-TV18's Timsy Jaipuria, Laurence Boone, chief economist, said some efforts have been made in recognising non-performing loans for the banking sector but more efforts need to be made.
She further added, "You have the 4 R's when you are dealing with the financial sector balance sheet which is recognition, recapitalisation, then some reform of the sector and what we really want to see is better governance for the banking sector and for the shadow banking sector."
According to a new OECD report, India is set for a modest recovery after a loss of momentum as reforms to simplify taxation lighten business regulations and upgrade infrastructure start to bear fruit.
"Further reforms to modernise the economy are now needed to drive the creation of high-quality jobs, as well as measures to improve public services and welfare," it said.
The latest OECD Economic Survey of India notes that while India has greatly expanded its participation in global trade in recent years, private investment remains relatively weak, the employment rate has declined amid a shortage of quality jobs, rural incomes are stagnating, and per-capita income varies considerably across states.