A hunt is on to track down men suspected to have leaked the discussions of a closed-door Meeting this week between Reserve Bank of India (RBI) deputy governor Viral Acharya and a dozen senior fund managers and bankers. Bond prices dipped soon after the meeting on Monday, with security yields further hardening after a news agency report linked the price movements to views purportedly expressed by Acharya. The media leak and trades by select institutions (which could have been privy to what was discussed) have not gone down well with the RBI top brass. Officials from the regulator are understood to have voiced their displeasure to Deutsche Bank, which organised the meeting between Acharya and its top clients. Finding itself in a spot, rather unwittingly, the German bank has reached out to all the participants in the meeting -explaining the situation as well as pointing out in its email that the views shared by the deputy governor were personal in nature and could not have been ascribed to the institution (RBI), two persons aware of the communication told ET. Deutsche will share the details of the participants to RBI. “Ideally, RBI should put up in their website the transcript or recordings of such meetings. Else, it could be per ceived as giving preferential access to large funds or banks…“ said a fund manager. “ Also, market people tend to read between the lines whenever the governor of deputy governor speaks,“ said a banker. “So there are high chances of misinterpretation of what is discussed in these meetings. One tends to read too much and give unnecessary significance to RBI officials’ choice of words,“ said the person. Such conversations inevitably prompt market men to guess RBI’s view on bond yields and inflation.For instance, after the meeting with Acharya some fund managers were of the belief that the central bank is not worried by the rise in government bond yields and continues to maintain the position that inflation targets are non-negotiable. On Monday , bond yields rose (and prices fell) to five-week low. While the question lingers whether Acharya had actually said these in so many words, traders sold bonds after the meeting with some selling continuing after the news report. RBI, however, in the past, has not been kind to such information sharing.Indeed, a senior official of a large bank has been denied invitation to such interactions ever since it was suspected (though wrongly) that he was responsible for a newspaper report about a meeting between the governor and a handful of bank economists. The questions that crop up are: will Deutsche blacklist any of the participants in future meetings with the regulator? And more importantly, since bond prices fell even before the new agency released the story, did any institution privy to the information offload securities? Deutsche Bank declined to comment while there was no response from the RBI spokesman. Since the days of Raghuram Rajan, the governor and deputy governors have been meeting institutions in separate groups. Till then, such interactions were typically with executive directors and chief general managers. “Central banks of many emerging markets have regular meetings with banks and market participants.Understandably , it’s not common in developed countries where there is an almost continuous flow of informa tion from the regulator to the market,“ said an economist with a fund house. In recent years facilitating such meetings for large clients has become crucial for market intermediaries, banks and brokerages. “Big clients are keen to chat with senior government officials, regulators as well as senior members of think tanks. It helps them gain a sharper perspective about a market where they are betting millions of dollars. However, no confidential information is shared in these meetings,“ said a senior analyst. The practice, however, has upset many smaller brokers and funds who never get a chance to sit across the table to read the body language of regulatory officials or count the number of times they say “growth“ or “inflation.“
Source: ET