The Metropolitan Chamber of Commerce and Industry (MCCI) organised the meeting at its office.

The RBI governor said, "The average South Asian (SA) growth of over 6 percent has been impressive, inflation moderate in spite of elevated prices of oil and food grains, and the external sector is stronger.

"I believe that the SA economic model has some inherent and unique strength. And domestic entrepreneurial class leads the output growth and enhanced efficiency," Reddy added.

He said, "There is a feeling that the prospects for the South Asian economies appear brighter than ever before in history, with a potential to be amongst the most-rapidly growing economies of the world--while contributing to significant reductions of global poverty".

In his welcoming speech, Latifur Rahman, president of Metropolitan Chamber of Commerce and Industry (MCCI), said, "It is our view that with the exception of one or two, monetary policies in the South Asian countries are yet to be fully able to foster and help the growth process".

Except some policy adjustment, the main emphasis remains limited to currency depreciation to improve competitiveness and thereby boost economic growth, he said.

The metropolitan chamber chief said in Bangladesh, exchange rate has been depreciated several times mainly to make the export prices competitive, but such devaluations yielded only one transaction benefit to the exporters and did not help the country's external competitiveness.

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), he observed.

"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.

The chief guest, Yaga Venugopal Reddy, replied to a number of queries from the local business leaders.

Asked if the contraction of monetary policy is the only answer to combat inflation, he said,

"Tightening or not tightening monetary policy depends on context, but not only on domestic context, also what other central banks are doing".

He however thinks contraction of monetary policy is only a solution, but definitely it depends much on effective monetary policy.

He said contraction of monetary policy could be adopted to maintain supply chain.

Pointing to the fact that contraction of monetary policy is being adopted everywhere in today's world, the Indian central bank governor said, "If you look at Japan, UK and even US, you can see contraction of monetary policy in these counties. In the context of the globalised monetary policy, we have to think about ourselves whether we shall go for such a policy."

Reddy said, "We believe that monetary policies help the growth process in South Asia in three ways---by providing price stability, by ensuring financial stability and by enabling availability of financial resources for an efficient growth process".

The RBI governor said it can be argued that it was possible for the South Asian economies to show impressive macro-economic achievements in the last five years, precisely because of the enabling monetary, financial and external sector environment, as managed by central banks.

Replying to an issue of harmonisation amongst trade, investment and financial integration raised by the MCCI president, Reddy said the RBI view is that the trade integration is undeniably beneficial, but financial integration has both, benefits and risks, at our stage of development.

To develop India-Bangladesh business relationship, he said, there should be intensive business-to-business interactions, dialogues and partnership between India and Bangladesh as long as they benefit businesses and people of both countries.

On good business culture, he said when two persons commence a train or bus or plane journey as business partners and end up as strangers, it is not so good a culture, but when two persons commence a journey as strangers and end up as business partners that is a good business culture.

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.