The entry of firms like Google, Amazon and Facebook (Meta), referred as big tech companies, also poses question marks around competition and data privacy.
"They (big tech) carry risks, which need to be properly assessed and dealt with," Das said while speaking at Modern BFSI Summit 2022 organised by Financial Express.
Such companies can include entities in e-commerce, search engines and social media platforms that have started to offer financial services in a "big way" on their own or through tie-ups, he said, adding this is leading to the use of new methodologies in credit assessment.
"Such large-scale use of new methodologies in credit assessment can create systemic concerns like overleverage, inadequate credit assessment and similar other risks," he added.
Das said deploying harsh recovery methods like calling up at odd hours or using foul language is "unacceptable" and assured that the RBI is paying "serious attention" to such happenings to ensure necessary action is taken to curb such activities.
He said most of such instances are reported from unregulated entities, but added that the central bank has also come across such tactics being used by entities regulated by the RBI, and urged all players to give special attention to the same.
The comments came at a time when there have been allegations of suicides by many borrowers triggered by harsh recovery practices by agents.
The central bank will continue with its role to foster innovation while trying to contain the systemic challenges, he said, adding that the RBI will soon come out with a discussion paper on digital lending.
The retail inflation stayed well above the RBI's tolerance limit due to high fuel and food prices amidst the war in Ukraine.
In April, the retail inflation was at 7.79 per cent.
Retail inflation tracked by the Consumer Price Index (CPI) measures the changes in prices from a retail market perspective.
RBI Governor Shaktikanta Das, at the recent monetary policy committee review deliberations, had categorically said that India's retail inflation is likely to stay above the tolerance level till the third quarter of FY23 before moderating below 6 per cent.
Das had also said that 75 per cent of the increase in inflation projections can be attributed to the food group.
For FY23, RBI sees overall inflation at 6.7 per cent, with 7.5 per cent in Q1, 7.4 per cent in Q2, 6.2 per cent in Q3, and 5.8 per cent in Q4, taking into consideration the normal monsoon and average crude oil basket price of $105 per barrel.
Notably, wholesale inflation in the country has been in double digits for over a year now.
Addressing a press conference, the governor said the RBI has changed the policy stance to drop the phrase "remains accommodative", and instead opted for "withdrawal of accommodation" for guiding its future moves.
The central bank did not hike the cash reserve ratio contrary to speculation, he said, adding that the liquidity withdrawal will be calibrated and measured. He assured that adequate liquidity will be available for banks to lend for economic growth.
The Indian economy continues to be resilient and is well placed to deal with challenges emerging from the global worries and will be supported by a banking system having strong capital buffers, low non-performing assets and higher provisioning coverage, Das said.
At a time when the RBI upped its inflation expectation to 6.7 per cent, the governor said he is confident that the actions being taken by the central bank will help reduce inflation and also inflationary expectations among the people.
He assured that the RBI does not want to take any abrupt or rough action that will be detrimental to inflation and the markets.
Das also said that the credit offtake has improved, and the number is over 12 per cent now.
To a question on what happens when the central bank misses its target of containing inflation with the headline number overshooting for three consecutive quarters, he said the central bank will deal with it as and when the situation arises.
When asked if the government should initiate more measures on the supply side, he said the government is "mindful" of the realities and will take appropriate measures.
The governor said the RBI is in constant dialogue with the government on many issues, including cryptocurrencies, and will be awaiting the discussion paper to be floated by the Centre soon.
The board approved the transfer of Rs 30,307 crore as surplus to the central government for the accounting year 2021-22 while deciding to maintain the Contingency Risk Buffer at 5.50 per cent, RBI said in a statement.
The decision on the dividend payment was made in the 596th meeting of the Central Board of Directors of RBI, headed by Governor Shaktikanta Das, held on Friday.
Last year in May, RBI declared a dividend of Rs 99,122 crore for the nine-month period (July 2020 to March 2021). The dividend was paid for that period as RBI aligned its financial year with the government's financial year.
Earlier, RBI used to follow July-June period earlier as against the government's April-March financial year.
During its meeting, the board reviewed the current economic situation, global and domestic challenges and the impact of recent geopolitical developments.
The board also discussed the working of RBI during the year April 2021 March 2022 and approved the annual report and accounts for the accounting year 2021-22, the statement said.
Addressing the media for the first time since the February 2020 monetary policy review offline here at the Mint Road headquarters, Das said the time is appropriate to put inflation ahead of growth in monetary policy priorities. It is a shift after three years, and the same is reflected in the upward revision in the inflation forecast for the current year.
Before the presser, the RBI-MPC voted to retain key policy rates unchanged and also retained the accommodative policy stance, even as it increased the inflation forecast to 5.7 per cent for the year, steeply higher than the 4.5 per cent projected in the February policy review.
It has also slashed its growth forecast for the present fiscal to 7.2 per cent from 7.8 per cent in February.
The governor blamed the upward review of prices outlook primarily on the ongoing Ukraine war and its impact on crude oil, edible oils and other key commodities.
To a question on increasing rupee-rouble trade, given the sweeping sanctions on Russian following its invasion of Ukraine in February and Russia's -- which holds 14 per cent of the global crude oil supplies and 17 per cent of natural gases -- promise of offering an almost 27 per cent discount on its oil, Das said the central bank will not do anything that goes against the spirit of the global sanction on that country.
The governor also said it has received the merger proposal from the HDFC twins
Observing that concerted efforts by all stakeholders have led to a significant increase in digital payments in recent years, RBI Governor Shaktikanta Das said there have, however, been some concerns on the reasonableness of various charges incurred by customers for digital payments through credit cards, debit cards, prepaid payment instruments (cards and wallets), Unified Payments Interface (UPI) and the like.
Entities involved in providing digital payment services incur costs, which are generally recovered from the merchant or customer or is borne by one or more of the participants, he said while unveiling the bi-monthly monetary policy.
While there are advantages and disadvantages of customers bearing these charges, they should be reasonable and should not become a deterrent in the adoption of digital payments, he added.
To take a comprehensive view of the issues involved, he said it is proposed to issue a discussion paper, which will cover all aspects related to charges involved in various channels of digital payments.
"The paper will also seek feedback on issues related to a convenience fee, surcharging, etc., and the measures required to make digital transactions affordable to users and economically remunerative to the providers. The paper will be released in a month's time," he said.
The Reserve Bank has been making efforts to facilitate greater participation of retail customers in financial markets -- investment in the G-secs segment through the recent launch of Retail Direct Scheme, where UPI, in addition to other options such as internet banking, can be used to make payments for participating in the primary and secondary markets.
Over time, UPI has also become a popular payment option for Initial Public Offerings (IPOs) since its availability from January 1, 2019, he said, adding it is reported that IPO applications of Rs 2 to Rs 5 lakh constitute approximately 10 per cent of subscription applications.
The transaction limit in the UPI system was enhanced from Rs 1 lakh to Rs 2 lakh in March 2020.
To further encourage the use of UPI by retail investors, he said it is proposed to enhance the transaction limit for payments through UPI for Retail Direct Scheme and IPO applications from Rs 2 lakh to Rs 5 lakh.
Separate instructions to NPCI will be issued shortly, Das added.
Observing that UPI is the single largest retail payment system in the country in terms of volume of transactions (14 crore transactions per day, October 2021), he said one of the initial objectives of UPI was to replace cash for low-value transactions.
Transaction data analysis shows that 50 per cent of transactions through UPI were below Rs 200, indicating its success, he said, adding these low-value transactions, however, utilise significant system capacity and resources, at times leading to customer inconvenience due to transaction failures because of issues related to connectivity.
It is, therefore, proposed to offer a simpler process flow by enabling small value transactions through an 'On-device' wallet in UPI app, which will conserve banks' system resources, without any change in the transaction experience for the user, he said.
Speaking at the eighth SBI Banking & Economics Conclave, he said: "There are signs that consumption demand triggered by the festive season is making a strong comeback."
"This would encourage firms to expand capacity and boost employment and investment amidst congenial financial conditions."
According to Das, the recent cut in excise duty on petrol and diesel by the Centre and in value-added tax (VAT) by several state governments will augment purchasing power of people, which in turn, will create space for additional consumption.
Besides, he said that while it is "heartening to note" that the economy is gradually getting back on its feet after a devastating second wave, recovery has progressed in an uneven manner.
"Contact-intensive services are still to regain the lost capacity despite rapid improvement in the recent period. The Q1: 2021-22 data on GDP revealed that there still exists significant gap in both private consumption and investment, relative to their pre-pandemic levels in 2019-20."
"So, while the economy is picking up pace, it is yet to cover a lot of ground before it gets broad-based and entrenched. This points to the need for sustained impetus so that growth could return to, or better still, exceed the pre-pandemic trend."
Furthermore, he said India has potential to grow at a reasonably high pace in the post-pandemic scenario.
"Several factors are stacked in India's favour. First, India as an emerging market and developing economy has significant potential to catch up with the rest of the world supported by favourable demographics, improving skill base and strong domestic demand."
"Second, the Government is providing necessary support - especially through capital expenditure and reforms in various sectors like infrastructure, manufacturing and telecom, apart from other institutional changes to boost productivity, ease supply constraints and improve business environment."
"Third, the pandemic has opened new opportunities of growth in digital and green technology and also on account of resetting of global supply chains that could be advantageous to India. Fourth, exports have been a bright spot during the recent months and are likely to benefit further from global economic recovery."
In the presence of such enabling conditions and supportive policies, he said that India has a unique opportunity to step up growth and emerge from the pandemic.
Das was appointed the RBI's 25th governor on December 11, 2018, initially for a period of three years.
An official order dated November 28 said the government has reappointed Das as the governor of the central bank for a period of three years beyond December 10, 2021.
The decision was taken by the Appointments Committee of Cabinet headed by Prime Minister Narendra Modi.
With the second term of three years, Das will head the RBI till December, 2024
The query that Urjit Patel failed to answer was what amount of demonetized currency had come back into the banking system. RBI by its own admission has said that a total of Rs 15.44 trillion of demonetized money existed as on 8th November, when Prime Minister Narendra Modi made the announcement. As of 10th December, RBI said that Rs 12.44 trillion had returned. But this figure was not acceptable to the finance ministry which wanted rechecking.
Readers must note that every single currency is accounted for and banks are legally bound to maintain the figures of how much and which currency note have come or gone through them. A failure to do so is an offence. Despite all the spin that champions of demonetization try to make a simple logic that one can wrap head around is that the government expected a large sum of money, the ‘black’ money, to not return to the banking system. As it appears from RBI’s initial admission, it is not going to be so.
Given the widespread corruption that has been a mainstay in India, trust on institutions barring a SEBI or an Election Commission is low. In that light, reassessing figures, taking an unusually long time to come out with numbers, create suspicion of data fudging that would suit the narrative in marketing heavy times. There is hope however, for truth to emerge, given the fact that institutions like parliamentary standing committees on finance are expected to be fair and unbiased.
What RBI has been producing as currency notes is not espousing any greater confidence either. Reports of, and with what appears as credible photographic evidence, currency notes with misaligned printing, with missing components, with smudging are abound. This added to the fact that the new currency notes do not carry any additional security features (sorry, no nano chip this time) makes the new currency vulnerable to the same problem that the old ones faced – counterfeiting.
Link: https://twitter.com/Rohinisgh_ET/status/822372224459882498
In an issue unrelated to demonetization, the less said about the street-thug type tweet of a member of the powerful Central Board of Directors of RBI, a reputed and senior civil servant, the better. Mr Shaktikanta Das took to Twitter to warn Amazon over the Indian flag on doormat in Canada issue. Asking Amazon, which incidentally did not violate the flag code which applies to the whole of India to ‘behave’, reeked of arrogance of power and certainly did not send a healthy message to investors. Sensing the folly, there was a rejoinder by Das stating that he got touchy since a national icon was involved and was committed to “economic reforms, ease of doing business and open trade”.
Link: https://twitter.com/DasShaktikanta/status/820628351647813632
This slide can however be arrested. Confidence can be restored in one of India’s finest institutions by firstly addressing the huge information asymmetry that has been created. Coming clean with details, however unpalatable, will be helpful. There are currently more questions than answers that people at large have. That the demonetization debates have educated and created awareness about many aspects of ‘money’ hitherto unknown to masses, coming clean on quality of new currency notes, details of currency flow to states and to banks during demonetization period, spelling plans of adding more security features, will help restore faith in RBI.
It is only in the best interest of the nation that independence of RBI, which in some aspects is intertwined with government, is maintained. In times when high hopes are pinned on the Indian economy, which has the important job to elevate large sections of people to greater economic freedom, it is important the government helps the central bank function as a transparent, responsible and accountable institution.
Q: What is GST and how is it going to affect the States and small businessmen and big corporate?
A: GST is very different from the existing tax structure. Before GST, the 70 year old taxation system as prescribed by the Constitution included the State list and the Central list. Under State list all commodities and services had a sales tax implemented by State government or VAT. There were also 10 to 12 other types of taxes levied by the State like entertainment tax, luxury tax, entry tax for import of goods from other states, Central sales tax and so on. Under Central list, there was Central excise, service tax and many more, levied by the Central government.
This made each State function like individual islands. For example, if a motorcycle was manufactured in Odisha got raw materials from Andhra Pradesh, taxes were paid to Andhra Pradesh. When sold it to a wholesaler in Odisha, one had to pay tax at this junction. Then again, while selling it in a third state, say West Bengal, again tax was levied there. So the manufacturer paid multiple taxes and the product price used to be high which decreased the competitiveness of our businesses and industry.
Q: Will products now become cheaper after implementing GST?
A: With introduction of GST, a single tax replaced the multiple taxes levied upon each commodity and service. But in social media, a question is making rounds that while GST is being claimed as a single tax, the bill receipt shows a SGST and a CGST. I wish to explain that there is only one tax but with two components which include a State share and a Central share. Now India became one market. If tax is paid once for a product during manufacturing, in the second stage while going from wholesaler to retailer the tax will be subtracted. So the price will become competitive.
Most products have reduced tax rate under GST while it has been raised for many services. Though it is believed this will increase its price, since the multiple taxes are not levied, the price will not increase drastically. It could be slightly high in some cases. If service tax has been increased from previous 15% to 18% under GST, that doesn’t mean the price will increase straight by 3 per cent because other taxes levied on the service will no more be included.
In fact, majority items in GST baskets have been decreased and only some have increased. It will be clear in two to three months if GST will overall increase the prices or not. But as much as I understand with the experience I have, there is no chance of increase in price to a great extent.
Q: How will GST help various States including Odisha? Will it benefit States with mining resources more?
A: States with mining resources could not witness industrial development compared to Maharshtra, Gujarat, Tamil Nadu. States in eastern belt like Bihar, West Bengal, Odisha have lagged behind in industrial development. Odisha, Madhya Pradesh, Chhattisgarh, Jharkhand have rich mines but could not see great industrial development. Since GST is a destination and consumption-based tax, States where goods and services are finally consumed will get more revenue. Earlier service tax was levied and collected only by the central government. However, in GST the service tax component will be shared equally between the centre and the State. Under the GST, for the first time the States have been given the right under the constitution to collect and keep the revenue generated from service tax.
Q. As being pointed out by political parties, has the implementation of GST been done in a hurry?
It is not at all a step taken in a hurry. There is no perfect moment for implementation and had GST been implemented after six months some problems might have surfaced. Over the past 7-8 months, both the Centre, State governments, officials and traders associations were clearly informed and made aware of the GST implementation from July 1. Ample preparations have been made for its implementation. As far as my understanding goes, adequate preparations have been made at the State and the Central level. Cases where adequate preparations have not been put in place, the government has given 2 months’ exemption from filing of tax returns. This is a very big change and whenever a new system is put in place some glitches will surface at the beginning but within 2-3 months everything will be sorted out.
Q. What’s your opinion on experts who feel that the tax slabs under GST are higher as compared to other countries?
If one follows the textbook GST implementation, there should have been only a single rate. However, India has been operating under an existing tax system for the past 70 years. There are many items wherein the poor and the common man pay a tax of 5-6-7 %. Tax rate on maximum food items have been kept very low under the new regime. If one goes for a common rate, then items used by the poor and the common man will be taxed higher and luxury goods will attract a lower tax, which is not at all feasible from a socio-economic equity point of view. So keeping in mind the tax legacy of our country, we have created 4-5 slabs. This is a new beginning and as far as my expectations go, in the next 3-4 years the tax slabs are likely to reduce. The Union Finance minister has already indicated that in the next 3-4 years, the 12% and the 18% slab will be combined together to create one slab.
Q. Important sectors like petroleum, power and real estate have not been included in GST. Is there any scope to include these in future?
In 2009, the empowered committee of State Finance ministers came out with a discussion paper in which electricity and real estate were not included. Now discussions are on at the GST Council for implementation of GST in real estate sector. We hope that GST will come into force in real estate within next couple of years. Electricity was not there in the first recommendation and it may get included in future. The states did not want Petroleum products to be included in GST as it is a major revenue source for the states. However, at the centre we wanted to include it. Hence, it was agreed that as per constitution of the regime petroleum and petroleum products are a part of the GST. At a future date the GST Council chaired by the Union Finance minister will decide the date from which petroleum and petroleum products will be taxed.
The Reserve Bank of India will very soon be coming out with the first financial inclusion index, which will assess progress in terms of access, usage and quality, Das said, while speaking at the Economic Times Financial Inclusion Summit.
It is the responsibility of all stakeholders to ensure that the financial ecosystem (including the digital medium) is inclusive and capable of effectively addressing risks like mis-selling, cybersecurity, data privacy and promoting trust in the financial system through appropriate financial education and awareness, he added.
Since the start of the last decade, financial inclusion has been a key focus area for the RBI to help formalise the economy by ensuring that banks reach the people. Technological advances made it easier and the government also gave it a greater thrust with the launch of the PM Jan Dhan Yojana scheme.
In order to make the post-pandemic recovery more inclusive and sustainable, FI would continue to be our policy priority, Das said.
To measure the extent of financial inclusion in the country, it has been decided to construct and periodically publish a financial inclusion index (FII), he said, adding an announcement was made some time back about such an index.
The index will have parameters across the three dimensions, including access, usage and quality, he said, adding work on FII is underway and the index will be published very shortly by the Reserve Bank.
Das said financial inclusion is a key driver of sustained and balanced economic growth, which helps reduce inequality and poverty, and while we have made tremendous strides on this aspect, the pandemic has created newer challenges and complexities.
The financial system will have a crucial role to fulfil the aspirations and needs of our economy on the mend, he said.
During the pandemic, the RBI's efforts on financial inclusion have helped in enabling the government to provide timely support through cash transfers under the Direct Benefit Transfer schemes, Das said, adding Rs 5.53 lakh crore was transferred digitally across 319 government schemes spread over 54 ministries in FY21.
The RBI has taken a slew of measures to mitigate the impact of COVID, including rate cuts, on-tap liquidity, cash reserve ratio exemptions and tweaks in the priority sector lending scheme, he said.
Payments are the lifeline of an economy and the operationalisation of Payment Infrastructure Development Fund (PIDF) will provide the necessary impetus for the development of payment acceptance infrastructure in tier-3 to tier-6 centres and northeastern states, Das said, adding that the fund is an initiative jointly carried out by the RBI, banks and card networks.
He said substantial progress has been made by banks with respect to financial inclusion plans (FIPs), which the RBI has advised them to prepare.
Greater focus is now being given to addressing the vulnerable segments of the economy and population while paying attention to consumer protection and enhancing the capacity of customers so that responsible and sustainable use of financial services can be achieved, the governor said.
The RBI has encountered challenges for financial inclusion, which include how to identify the customer, reaching the last mile and provide relevant products that are safe, he added.
Scaling up of the Centre for Financial Literacy (CFL) project across the country at the block level by March 2024 is expected to enhance the effectiveness of community-led participatory approaches for greater financial literacy, he said.
Das also said that 15 state education boards have consented to include financial education in their curriculum to ensure kids get going on crucial knowledge.
There is a need for accelerated universal reach of bank accounts along with access to financial products relating to credit, investment, insurance and pension, he noted.
The Reserve Bank of India has "a sense" of the current liquidity situation and after his appointment as its Governor has announced additional infusion of liquidity via open market operations (OMOs) of Rs 60,000 crore, Das said here on Monday after meeting the representatives of Micro, Small and Medium Enterprises (MSMEs).
"While dealing with the issue of liquidity, I would also like to say that it is something which the RBI is constantly monitoring and will take steps whenever there is a need to deal with the liquidity deficit, if it is noticed.
"... At the same time I must also add the RBI would not like a situation where liquidity becomes a kind of a loose money. Any infusion of liquidity will have to be very carefully considered and has to be need-based. So, the caution and care has to be exercised by the RBI, that excess liquidity which sometimes has adverse consequences that is not created," he added.
Das further said that he will meet the representatives of Non-banking Financial Companies (NBFCs) on Tuesday in Mumbai.
Former Finance Minister P. Chidambaram said Das was the second person to be appointed at a key post for defeinding the 2016 demonetisation move and it showed the government's insensitivity towards common people. The Congress leader was apparently refering to the recent appointment of Krishnamurthy Subramanian as the Chief Economic Adviser (CEA) as the first such instance.
"Government has appointed two persons who vocally supported demonetisation to two key posts. What does it say about the Modi government? Is government telling the people of the country 'we don't care what you think, we will do exactly as we please'?" Chidambaram said in a tweet.
The government on Tuesday appointed Das, who as Economic Affairs Secretary steered the monetary situation post-demonetisation, as the new Reserve Bank of India (RBI) Governor, a day after Urjit Patel resigned amidst a tiff with the government on the central bank's autonomy.
Das emerged as the face of the government post-demonetisation, strongly defending the move as a step that would curb black money.
Earlier, the government had appointed Krishnamurthy Subramanian, a strong supporter of demonetisation and a critic of dynastic politics, as its CEA after Arvind Subramanian resigned.
Senior Congress leader Kapil Sibal also attacked the government on Das's appointment saying the new incumbent would play to the tunes of the government.
"Shaktikantadas our new RBI Governor... A bureaucrat not an economist... Defended demonetisation. The Pied Piper will play the tune and the RBI will follow. Inevitable outcome will be that RBI's reserves will be used for government doles. Yet another institution will diminish," he said in a tweet.
Das' appointment came at a time when the government and the RBI are engaged in a tussle over several issues including transfer of the central bank's reserves, over which Patel had reservations after the government hinted at forcing him using provisions of the RBI Act.
"I expect the process of counting to get completed in the next few months. Counting capacity with the Reserve Bank of India is to take care of a normal situation when business is as usual. But here, suddenly 86 per cent of the currency in circulation got demonetised (on November 8 last)," Das told NDTV in an interview.
"Counting capacity has limitations, that's why it's taking time. I will not be able to spell out the deadline. Let's wait for the RBI to complete the process," he added.
Das is in Japan to attend the Asian Development Bank's 50th annual meeting.
He said the Finance Ministry, in discussion with the RBI, identified areas where double counting of notes might be happening because currency was moving from bank branches to their regional offices and then to the currency chests and the RBI.
"A decision was taken that it will be desirable to count the notes physically, to do a thorough physical verification of the notes received," he said.
Das said the task of counting of notes was enormous.
"The RBI has put all its counting machines to use. They are currently working overtime. The RBI is exploring possibility of getting additional counting facilities to speed up the process," he said.
Prime Minister Narendra Modi on November 8 last year announced demonetisation of Rs 500 and Rs 1,000 notes. The last date for depositing the scrapped currency notes in banks was December 30, 2016, though the window is still open till June 30 for Non-Resident Indians.
"GST should be implemented by July 1. All states have agreed (on the date)," Das told reporters here.
The government plans to get the GST Council's approval on iGST (integrated GST), cGST (central GST) and sGST (state GST) drafts at its March 4-5 meeting before the second half of the budget session of Parliament begins on March 9.
The draft compensation bill has already been approved in the Council's February 18 meeting.
The draft laws passed by the Council will have to be passed by Parliament. Simultaneously, sGST will have to be passed by state legislatures.
The four bills form the enabling laws under the GST constitutional amendment.
Another step remaining is to slot all the commodities under the GST tax slabs: 5 per cent, 12 per cent, 18 per cent and 28 per cent.
Each item has to be fitted under a particular slab. After the March 4-5 meeting, GST officers will do the slotting.
This apart, traders who are registered with the Agricultural Produce Marketing Committees can withdraw up to Rs 50,000 per week for a smooth procurement process, Economic Affairs Secretary Shaktikanta Das told reporters here.
"Agriculture is an important component. We are at the commencement of the Rabi season. We want to ensure farmers get smooth supply of fertilizers and other items," Das said.
While concessions have been made for families that have an upcoming wedding, the amount of money that an individual can exchange by handing over the old Rs 500 and Rs 1,000 notes in banks has been lowered to Rs 2,000 from Friday, the official said.
Also read: ATMs to disburse new currency by early December: Finance Ministry
He said a member of the family that has an upcoming wedding can withdraw up to Rs 250,000 subject to one of the members furnishing the PAN card details and also providing an undertaking that no other member will withdraw such an amount for that purpose.
Two other decisions taken on Thursday are: A 15-day extension in the payment of crop insurance and an allowance for withdrawing Rs 10,000 as advance for central government employees up to Group 'C' to be adjusted against their November salary.
"Assumed charge as Governor, Reserve Bank of India. Thank you each and everyone for your good wishes," the new incumbent said in a Tweet.
Das, who as Economic Affairs Secretary steered the monetary situation post-demonetisation, was appointed the Reserve Bank of India (RBI) Governor on Tuesday.
His appointment came at a time when the government and the RBI are engaged in a tussle over several issues including transfer of the central bank's reserves, over which Patel had reservations after the government hinted at forcing him using provisions of the RBI Act.
Das, a retired 1980-batch IAS officer from the Tamil Nadu cadre, was a member of the 15th Finance Commission of India and India's Sherpa to G20. Having a master's degree from St. Stephen's College, he earlier served as Joint Secretary in the Expenditure Department of the Finance Ministry.
In a development that came as an embarrassment for the government, Patel resigned on Monday citing "personal reasons" even as his various predecessors hinted that the decision was rooted in the recent controversy involving the government and the central bank.
His resignation came against the backdrop of the tiff between the government and the central bank over the liquidity and credit crunch in the economy that provoked an extraordinary meeting of the RBI board on November 19.
Congratulations to Shri @DasShaktikanta on his appointment as Governor @RBI. His experience in economic affairs will push our economy towards higher & sustainable growth. I convey my best wishes for a successful tenure in his new role. Indeed, it is a proud moment for all Odias.
— Dharmendra Pradhan (@dpradhanbjp) December 11, 2018
My best wishes to Shri Shaktikanta Das on his new role. He will be the first RBI governor from Odisha which is a matter of pride for our state.
— Niranjan Patnaik (@NPatnaikOdisha) December 11, 2018
Congratulations to Shri @DasShaktikanta on your appointment as Governor @RBI. I convey my best wishes for a successful tenure in your new role. Indeed, it is a proud moment for all Odias. pic.twitter.com/dmUj7S3WbB
— Jual Oram (@jualoram) December 11, 2018
"Former DEA secretary Sh Shaktikanta Das @DasShaktikanta appointed India's G20 Sherpa till December 31, 2018, for the Development Track of the G20," the Ministry of Finance said in a series of tweets.
There are two tracks in G20 -- the Finance Track and the Development Track.
"Finance Track is managed by the Secretary (Economic Affairs), Ministry of Finance, as India's Deputy to G-20 and the Development Track is coordinated by the Sherpa. The Department of Economic Affairs will provide necessary support to the Sherpa," it added.
Former Niti Aayog vice-chairman Arvind Panagariya had suggested to Prime Minister Narendra Modi to find a full-time Sherpa for G20 talks as India's role is expanding in the global arena.
Panagariya was appointed India's Sherpa for the G20 talks in September 2015, replacing the then railway minister Suresh Prabhu.
Sherpas, who are representatives of leaders of G20 member countries, coordinate on the agenda of the summit.
As per practice, the deputy chairman of the erstwhile Planning Commission used to be the Sherpa for G20 talks.
During the UPA regime, former deputy chairman of Planning Commission Montek Singh Ahluwalia was Sherpa for G20 talks.
The G20, a central forum for international cooperation on financial and economic issues, accounts for more than four- fifths of gross world product and is home to almost two-thirds of the world's population.
Given the unseemly tug of war between the central bank and the Modi government that resulted in the premature departure of Patel, it was inevitable that the choice of Das, the man who steered the demonetization and its aftermath, would not go down well with a lot of people who are concerned about the independence and integrity of RBI or are ideologically opposed to Modi and the BJP. Their apprehension that the premier bank will be in serious danger of becoming a ‘handmaiden’ of the central government was not entirely misplaced. After all, Das, in his capacity as secretary in the Department of Economic Affairs (DEA), was the face of demonetization in 2016 and was given the unenviable task of defending the indefensible day in and day out by the Modi government.
Even this columnist shared much of the misgivings expressed in public forums in the immediate aftermath of Das’ appointment. There is little doubt that the intention behind the Modi-Jaitley duo’s decision to choose Das for the top job was to make the RBI an extension of the PMO or the Finance ministry and I said so on Facebook. But to extrapolate that and assume that the new Governor would indeed be willing to become a ‘lapdog’ of the Modi government is, in my view, preposterous to say the least.
By all accounts, Das is a man of impeccable integrity. Why should we assume that he would dance to the tunes of his ‘masters’ just because he served in the government not so long ago and steered the mammoth demonetization exercise and its aftermath? After all, 12 of the 25 RBI Governors so far have been career bureaucrats. If IAS officers appointed as head of statutory bodies like Comptroller and Auditor General (CAG), Central Vigilance Commission (CVC) and Election Commission (EC) immediately after retirement can be expected to stay independent and not compromise their integrity, why on earth should we deny the benefit of doubt to Das?
Two examples – one about a quarter century old and the other from a more recent past - would illustrate the point that I am trying to make. Remember TN Seshan, the Chief Election Commissioner (CEC), who transformed the EC with his no-nonsense, sledgehammer approach to the conduct of elections? Prior to his appointment s CEC, he had served loyally under the Rajiv Gandhi government. There was nothing in his service record for anyone to believe that he would turn out to be the worst nightmare of every political party, including the Congress of which he was alleged to be a ‘stooge’? [I remember an interviewer asking him on TV if it was true that he had walked, umbrella in hand, with Rajiv for 3 kms during a road show in Kolkata heat when he served in the government. “Look at me,” Seshan said in his inimitable style, pointing to his pot belly, “do you seriously believe I could walk 3 kms at one stretch?” As CEC, the same man cleaned up the Augean stables of Indian elections. Far from becoming a ‘handmaiden’ of the government that appointed him, he beat the living daylights of politicians of all hues. Former Prime Minister Chandrasekhar, who appointed him CEC, was to later rue that “It was the worst decision of my life!”
The other man was former CAG Vinod Rai. Appointed by the UPA government in January, 2008, he had no problem severely indicting the same government on the 2G and coal scams at a time when it was very much in power. The Congress may have gone to town accusing him of working at the behest of the BJP. But the fact that no less than the Supreme Court handpicked him to clean up the cesspool called BCCI proves that the allegation was politically motivated.
Post-independent Indian history is replete with examples of officers, who have served loyally under various governments, acting without fear or favour after being appointed to a statutory body. And there is nothing in Das’ illustrious record to suggest he would not be one such officer. Forget the Seshans and the Rais; let us consider the case of Urjit Patel, Das’ immediate predecessor. Isn’t it rather amusing that the man, who was pilloried day in and day out, called all kinds of names and was the subject of countless jokes and memes on social media for his role in demonetization, has suddenly emerged as a man of impeccable integrity after he decided to put in his papers apparently in protest against the meddling by the Modi government?
What is particularly disgusting is the incessant harping on the fact that Das is a ‘mere MA in History’. As if that in itself makes him unfit to head an organization like RBI! Apart from the fact that he has done a course in financial management from IIM, Bangalore, Das has served as secretary of the Revenue and Economic Affairs ministry and has contributed significantly to the preparation of budgets even during the UPA regime. I don’t recollect any such outrage when S. Venkitaramanan, a ‘mere’ M Sc. in Physics, was appointed RBI Governor in the early 1990s. Nor do I know of any breast-beating over the fact that a ‘mere’ law graduate is the country’s Finance minister of the country (Arun Jaitley) or over the fact that one of his predecessors (Pranab Mukherjee) was a ‘mere’ MA in Political Science. The attack on Das on this score is mean, below the belt – and I dare say – politically motivated.
In my view, it is grossly unfair to judge the man even before he has settled down on his chair.
(DISCLAIMER: This is an opinion piece. The views expressed are author’s own and have nothing to do with OTV’s charter or views. OTV does not assume any responsibility or liability for the same)
Das said that "if the unit of 25 basis points is not sacrosanct and just a convention, monetary policy can be well served by calibrating the size of the policy rate to the dynamics of the situation and the size of the change itself can convey the stance of policy".
He further explained that if easing of monetary policy is required but the central bank prefers to be cautious in its accommodation, a 10 bps reduction in the policy rate would perhaps communicate the intent of the authorities more clearly than "two separate moves -- one on the policy rate, wasting 15 basis points of valuable rate action to rounding off, and the other on the stance, which in a sense binds future policy action to a pre-committed direction."
"Likewise, in a situation in which the central bank prefers to be accommodative but not overly so, it could announce a cut in the policy rate by 35 basis points if it has judged that the standard 25 basis points is too little, but its multiple, i.e., 50 basis points is too much," Das said.
The top court also ordered the central bank to withdraw its non-disclosure policy, which the court concluded is in violation of the apex court's judgment in 2015.
Taking a serious view of the continued defiance the court came down heavily asking the RBI to make full disclosure of its annual inspection reports on the financial health of banks including position of NPAs and also withdraw its disclosure norms as it came in the way of making public information on the state of banks under the RTI.
A bench of Justice L. Nageswara Rao and Justice M. R. Shah said: "Any further violation will be viewed seriously."
The RBI, as per 2015 judgment, was supposed to disclose the annual audit report of the banks, status of NPAs and action taken there on.
The top court by its 2015 order had asked the RBI to share information on the annual audit of the banks including on NPAs under the Right to Information Act.
However, this was stalled after RBI introduced disclosure norms that blocked the disclosure of information on the financial health of the banks under the RTI. An RTI activist Subhash Chander Agrawal had moved the top court seeking contempt action against RBI Governor for not complying with its 2015 judgment.
Girish Mittal and Agrawal had moved the top court for contempt action against the RBI not complying with the court's direction to disclose information under the Right to Information (RTI) Act.
The petitioners had claimed that RBI and its former Governor Urjit Patel had "willfully and deliberately" disobeyed the top court's judgement asking the central bank to disclose information under the RTI Act.
The two petitioners sought initiation of contempt of court action against former Governor for not disclosing information as directed by the top court.
One of the contempt petition filed by Girish Mittal said that RBI refused to provide information sought about the inspection reports of some banks.
In December 2015, the petitioner under the RTI Act had sought certain information which included copies of inspection reports of ICICI Bank, Axis Bank, HDFC Bank and State Bank of India from April 2011 till December 2015.
The petitioner had also sought copies of case files with file notings on various irregularities detected by RBI in case of Sahara Group of companies and erstwhile Bank of Rajasthan by these entities themselves and their known/unknown promoters.
However, RBI denied the information in January 2016 that such information is exempted under Section 8(1)(e) of the RTI Act and Section 45NB of the Reserve Bank of India Act.
The petitioners contended that top court in 2016 while directing disclosure of a very similar type of information sought under the RTI Act had observed RBI is clearly not in any fiduciary relationship with any bank.
The petitioners has argued that the responses of RBI are in complete violation of the top court judgment by which it was held that RBI ought to act with transparency and not hide information that might embarrass individual banks and it is duty bound to comply with the provisions of the RTI Act and disclose the information sought.
The death toll in the Kerala floods is 95, as per government figures, and over 1.89 lakh people displaced by the deluge since August 8 have taken refuge in 1,118 camps, some of which were visited by Gandhi, the Lok Sabha MP from Wayanad, on Monday.
In a letter to the Reserve Bank of India (RBI) governor, Gandhi said Kerala has witnessed the worst floods in over a century and the devastating impact of the deluge is further compounded by the inability of farmers to repay agriculture loans on account of widespread crop loss, and extensive damage to other productive assets.
External factors such as the sharp fall in global commodity price of cash crops has also adversely affected the ability of farmers to bounce back, he said.
"Kerala has witnessed a tragic spate of farmer suicides in the aftermath of banks initiating recovery proceedings against helpless farmers under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act)," the Congress leader claimed.
"Despite the demand from the state government and opposition parties to extend the moratorium on repayment of loans to December 31, 2019; the state level banker's committee has refused to consider the demand.
"I request the RBI to take measures to extend the moratorium on repayment to December 31, 2019," he said in his letter to Das.
The Congress leader on Monday had visited flood-affected areas in his Wayanad Lok Sabha constituency in Kerala, including worst-hit Puthumala, and assured all help to those hit by the calamity to rebuild their lives.
As per the official data, 1,057 houses have been completely damaged and 11,159 partially destroyed in the deluge.
Das said the differences of opinion between the government and the monetary authority happens in all the countries as the perspectives are different, but it is essential to discuss, talk and resolve the differences.
"Let me tell you, there is lot of interaction between the RBI and the government. But, so far as decision-making is concerned or taking a final call on any issue is concerned, I can tell you, with all my confidence, that they are taken by the RBI and the RBI is more than 100 percent autonomous in decision-making. Nobody interferes in my decision-making," Das told an event organised by the media house India Today group.
He said there has to be exchanges of ideas and explaining one's position to the other is necessary as it creates a harmonious and healthy relationship.
The conversations with the government cannot be stopped because the government is the sovereign and the RBI is part of the sovereign, he underlined.
"The RBI is not a cheerleader for anyone but people who say the central bank should not be a cheerleader for the government, I have one question: 'Do you expect the central bank to go on lecturing and abusing the government on the economy?'" Das wondered aloud.
There will be differences of opinions, there is a difference of opinion between the RBI and the government on several issues but we do talk and these discussions are internally, he explained.
"If at the drop of a hat, I rush to the media and make a statement expressing my differences with the government, then what it is going to achieve," Das asked and said it is desirable that such expression of dissent is done internally.
"In fact, let me may tell you when you have such discussions, the central bank carries greater weight in getting things which it wants to get done," the governor said.
It can be recalled that during the tenors of the past two governors--Raghuram Rajan and Urjit Patel--the differences between the government and the Mint Road began to spill onto the public domain. This had both of them leaving and also the deputy governor Viral Acharya.
Das also said in the wake of the crisis at Punjab & Maharashtra Cooperative (PMC) Bank, the RBI is reviewing the existing regulatory framework for cooperative banks and will discuss the matter with the government.
The statement assumes importance as PMC is the 24th cooperative bank to be placed under RBI administrators in 2019 and there are many regulatory and administrative gaps in the system as the states have a big say in their matters. Also, there is political interference in their functioning.
Urban cooperative banks are registered as cooperative societies either with the State Cooperative Societies Act or the Multi-State Cooperative Societies Act, 2002 and are regulated and supervised by the Registrar of Cooperative Societies of the respective states or by the Central Registrar of Cooperative Societies.
The RBI regulates and supervises only the banking functions of the urban cooperatives and carries out on-site inspections and off-site surveillance on them and also issues directions and operational instructions to protect the interest of the depositors.
"So far as the RBI is concerned, I would like to make it very clear that our banking sector remains sound and stable and there is no reason for any unnecessary panic," Das told reporters at the customary post-policy presser.
He said sometimes unnecessary rumours can create panic and urged the public not to pay attention to them.
On September 23, RBI had put a slew of restrictions on PMC after finding financial irregularities and under-reporting of loans given to the bankrupt real estate developer HDIL.
Das claimed that RBI acted very swiftly and promptly, when the issue was brought to its notice. The RBI superseded the previous management and appointed an administrator at the urban cooperative bank. It also revised the withdrawal limit from Rs an initial amount of Rs 1,000 per depositors to Rs 10,000 and very recently to Rs 25,000 per account.
However, it can be noted that the scam and underreporting at PMC was on for the past several years and RBI's own annual inspections did not find anything amiss all these years and the action came only after a board member blew the lid over on September 17.
The governor also assured that RBI would not allow any cooperative bank to collapse. "One incident cannot be and should not be used to generalise the health of the cooperative banking sector," he emphasised.
Das said the RBI is also reviewing the regulatory framework of cooperative banks.
"Based on our review, we will take a fresh look at the regulatory framework of the cooperative banks. If any changes are required, we will take up with the matter with the government," he said.
As per the confession made by the suspended managing director of PMC Bank Joy Thomas, the bank kept maintained its loans to HDIL-as much as over 73 percent of its book or Rs 6,500 crore of the Rs 8,880 crore assets, as standard even when the bankrupt real estate company was defaulting on repayments from the past two-three years.
Asked why was RBI, which carries out annual inspection of all cooperative banks, was not able to identify the problems all these years, all Das said was that all aspects of PMC is being looked into.
"Since the matter is under the investigation of the EOW, I would not like to go into any further now," he said.
On whether the deposit insurance cover should be enhanced from the present Rs 1 lakh, deputy governor NS Vishwanathan said there has been a demand for the same but no decision has been taken yet.
"There has been a demand in the past as well but to the extent of deposit insurance cover, there are many elements that get into it as to how much percentage of deposits should get covered and how many percentage of depositors should be covered. Though there have been studies on the topic no final decision has been taken," he said.
Stating that RBI is monitoring the top 50 NBFCs and HFCs, he said, "RBI will endeavour to ensure that we do not encounter failure of another large systematically important NBFC. With that objective we are monitoring them."
The next MPC meeting will take a call on the lower bound of repo rate when they deliberate on it, he said.
The Governor was responding to queries that if the RBI may reach near about 5 and 4.75 per cent, which is historically low, there is no space to go beyond that. So, by this statement, the MPC is giving this indication that for policy rate, there is no lower bound as such, as per the edited minutes of the MPC media meeting on October 4 .
"No, how much policy rate is around the lower bound - we have not said anything about it. What we want to say that we are giving some kind of forward guidance that as long as growth momentum remains as it is and till the growth is revived, the RBI will continue to remain in an accommodative mode.
"So, you cannot make a conclusion out of it on what is the minimum rate, what is the minimum repo rate where the RBI will take a pause. It is not possible to comment on that at this particular point of time. All that it says is to give clear indication that RBI will continue with the accommodative stance as long as it is necessary to revive the growth momentum," Das said.
On if the MPC are seeing the historical low as a lower bound, Das said: "It will not be possible for me to say anything about the lower bound. That will again depend on deliberations of the MPC. When the next deliberation of MPC will happen, then the decision will be taken."
The issue of lower bound of repo rate has arisen because the repo rate has now touched 5.15 per cent (lowest since March 2010) and with the RBI lending support to the government growth measures, economists and experts feel very soon in the next meeting of MPC, it may touch below 5 per cent which many feel is a lower bound rate or terminal rate.
On the issue of the side-effects of the government's measures to spur demand and private consumption impact on the fiscal deficit which faces an almost Rs 1.45 lakh crore dent in the revenue, Das said that the RBI believes government's commitments to stick to fiscal deficit and there are several options before the government to make it up through other sources.
"At this point of time, it may be noted that the government has made a statement that they will adhere to the fiscal deficit target of the current year. So, we have therefore no reason to doubt the commitment of the government to maintain the fiscal deficit number as given in the budget. And, this I would say because as you know the government government has several sources of revenue, so, whatever shortfall is expected because of the announcement of the corporate tax rate cuts, the government has option of making it up through other sources.
"But since government has come out with the statement and going by the past track record of the government, we have no reason to doubt the statement of the government and we go by the statement made by the government that they will maintain the fiscal deficit target," he said.
In 2019, the Reserve Bank of India (RBI) has delivered 135 basis points (bps) of cuts in its key lending rate.
Das, according to the minutes, saw domestic demand moderating significantly.
"As the inflation scenario remains benign with headline inflation projected at below target in the remaining period of 2019-20 and in Q1:2020-21, there is policy space to address growth concerns," Das said.
"The weakening of private consumption, which, for long, has been the bedrock of aggregate demand, in particular, is a matter of concern," the Governor added.
Besides, a number of MPC members expressed concerns over the transmission of rates. While Das said that "monetary transmission has remained weak" external member Chetan Ghate said the "monetary transmission has worsened since the last review".
Das, however, cautioned the government, saying that "there is also a need to be watchful of the fiscal situation; however, the government has indicated that it would maintain the fiscal deficit".
On the road ahead, MPC member Michael Debabrata Patra stressed that a full throttle effort by all arms of macroeconomic management is the need of the hour.
The RBI on October 5 announced a 25 basis point rate cut in its repo, or short-term lending rate for commercial banks, to 5.15 per cent, from 5.40 per cent, after the rate of gross domestic product (GDP) growth during the first quarter slumped to 5 per cent.
"Many of the problems that currently seem to affect the PSBs such as the elevated levels of NPA, capital shortfalls, frauds and inadequate risk management can mostly be attributed to the manifestation of underlying corporate governance issues," the RBI Governor said at a conference in Ahmedabad.
Das further said that the role of independent boards in fostering a compliance culture by establishing the proper systems of control, audit and distinct reporting of business and risk management has been found wanting in some PSBs, leading to mounting of NPAs.
Besides, the RBI Governor noted that the understanding of risks from a business perspective by the boards in some banks has been inadequate due to skill gaps and competency issues.
Das highlighted that the increase in NPAs was significantly higher in PSBs as compared to their private and foreign counterparts.
PSBs, probably to fulfil the additional social objective of their mandate, took higher exposure in some of the critical sectors of the economy such as mining, iron and steel, and infrastructure.
"NPA levels in these sectors shot up as all these sectors suffered external shocks leading to the respective stress -- mining and energy was hit by the cancellation of allocation of coal blocks, while iron and steel sector faced cost pressures due to dumping of cheaper steel from China," Das added.
"A lot of issues, including financial inclusion programmes, banking presence, digital payments, streamlining agriculture loans and direct transfer benefits were discussed," Das told mediapersons here.
Das met the Chief Minister ahead of the central board meeting of RBI scheduled to be held here on Friday after seven years. Last time the meeting was held here in 2012, said the RBI Governor.
"Since Odisha is my home state, it was a courtesy meeting with the Chief Minister," said Das.
(IANS)
He also hoped for the US-China truce on trade tariffs, announced over the weekend, would last as he pitched for coordinated efforts to push global growth like those after the 2008 financial crisis.
The comments from Das come following a series of five consecutive rate cuts by RBI starting February this year by a cumulative 1.35 per cent.
Both the government and RBI have acted in time. And I can say with regard RBI, we have acted a little bit ahead of time in terms of reducing our policy rates. As early as February this year, the RBI saw that there is a growth slowdown, we saw that momentum for the slowdown is building up, so we started cutting rates this year, he said.
Speaking at the India Economic Conclave organised by the Times Group, he said at that in February, the market was surprised with the RBI's call. He wondered why is it surprised market participants now also with a pause call.
In the last MPC meeting when we took a pause, I don't know why the market was surprised. February, I was told that the markets were surprised, but subsequently, I'm happy and thank all of you for accepting that it was a right call to take.
"This time the call that we've taken, I do hope that the events will unfold in a manner which will prove that the MPC decision was right, he said.
(PTI)
The Reserve Bank of India (RBI) in its sixth bi-monthly monetary policy pegged GDP growth for FY21 at 6 per cent but guided towards an uncertain inflation outlook.
In a January 31 release, the National Statistical Office (NSO) had revised down real GDP growth for FY19 to 6.1 per cent from 6.8 per cent provided in the provisional estimates of May 2019. Given this, the central bank noted that the economy is still plagued by deep output gaps.
"The RBI has several instruments to address the sluggishness in the growth momentum," Das told reporters at the customary post-policy conference.
The monetary policy committee (MPC) kept the policy repo rate unchanged at 5.15 per cent, continuing with the accommodative stance to revive growth.
The governor said the continuity in policy from last pause should not be read as a pointer to future actions. "While the decision is as per expectations, it is important not to discount RBI," he said.
(PTI)
Earlier this month, the central bank opted for a status quo on the benchmark interest rate, amid signs of hardening inflation and an uncertain global environment.
Transmission of rate cuts is slowly and steadily improving, Das told reporters after the RBI's board meeting here, adding that it is expected to improve further.
Finance Minister Nirmala Sitharaman also addressed the board of the central bank.
(PTI)
In an interview with PTI, he said the fallout of the outbreak of coronavirus in China needs to be closely monitored by "every policymaker" to tailor a swift response.
While Finance Minister Nirmala Sitharaman's Budget for 2020-21 and recent steps have created a facilitating eco-system for reviving demand and consumption, it is necessary to undertake land and labour reforms, bring efficiencies in agri marketing and focus on skill development, he said.
Das said the RBI saw an imminent slowdown in growth early in 2019 and used the space that was opened up by the moderation in inflation to cut interest rates on five consecutive occasions.
He cited global trade and business uncertainties together with sluggish domestic demand leading to lower capacity utilisation at factories and twin balance sheet crisis of rising non-performing assets (NPAs) or bad loans on the one hand, and heavily indebted corporates on the other, for the slowdown in the economy.
"There are certain positive evidences visible ... things slightly picking up but we have to wait and see whether these positive trends are sustaining themselves and we have to see how durable they are," he said.
He refused to say if the growth slowing down to 4.5 per cent in July-September was the bottom of the pit that the economy can see. "As I have said there are evidences of positive developments. But we have to see how durable are these positive developments before we pass a judgment that from here on it is an upward trajectory."
"By and large, if you look at our projection which we have given, things should start improving in the next financial year. For next financial year, we have projected 6 per cent of GDP growth against 5 per cent for the fiscal that ends in March."
The GDP growth in October-December is expected to drop below its previous quarter rate of 4.5 per cent despite a slight recovery in industrial production and positive manufacturing PMI.
Das, a career bureaucrat who was appointed RBI governor after the sudden exit of Urjit Patel, said he would refrain from characterising current slowdown as structural or cyclical.
"My response to such questions is that the response to the current situation has to be both countercyclical as well as structural that I have said earlier also. So, there is a need for counter-cyclical responses, which I think the Budget has attempted to respond through counter-cyclical measures.
"There are structural aspects also which needs to be undertaken. Some of these things have been mentioned in the budget. So, we look forward to more such structural changes," he said.
While Sitharaman thinks the slowdown is cyclical, others such as former finance minister P Chidambaram believe it is structural arising from the way the Modi government has handled the economy.
Structural reforms, Das said, should be in "agricultural marketing to make the supply chain and the value chain" more efficient.
Also, the APMC Act, which gives states unbridled powers, needs to be significantly amended.
"Then there is scope for land and labour reforms," he said. "There has to be a focus on skill development and improving labour productivity, which will arise from labour reforms. Measures have been taken but these processes need to be continued."
"Recent years have been full of uncertainties. Uncertainties emanating mainly from global factors together with certain domestic factors," he said adding Britain exiting from the European Union and trade tension between the US and China created a lot of global uncertainties.
This coupled with domestic slowdown leading to lower capacity utilisation and twin balance sheet problems led to corporates deleveraging that also impacted the MSME sector.
"As early as February last year we saw that the growth momentum was sort of slowing down. That is why Monetary Policy Committee started cutting the interest rates and we cut in for five consecutive times till October and in December when we saw some signs of inflation picking up we took a pause and again in February we have taken a pause," he said.
On the impact of coronavirus on growth, he said the outbreak is bigger than the previous similar problem of SARS in 2003. Also, China is a bigger economy with a larger share in the global economy and so it slowing down will have an impact around the globe, he said.
"The Chief of IMF has already voiced her concern about the impact of coronavirus at the global level. So, therefore, every major economy today will have to be very careful and closely monitoring it," he said.
"So far as India is concerned, China is an important trading partner and policymakers both in government and the monetary authority that is a reserve bank, we are very watchful of the developments that are taking place."
He said India's economic boom nearly two decades back was led by growth of IT sector, expansion in telecom and massive investment in infrastructure led by the Golden Quadrilateral highways project.
Sunrise sectors today are a technology which will generate a lot of economic activity and employment, he said, adding the Budget has rightly focused on the creation of the National Infrastructure Pipeline of Rs 103 lakh crore of projects which will create jobs and boost economic activity.
(PTI)
"The asset-liability management (ALM) position and other relevant aspects of the top 50 NBFCs are being closely monitored. It covers all NBFCs with asset size above Rs 5,000 crore. The ALM of top 51-100 NBFCs is also being examined by the respective regional offices of the RBI," Das said at the 'Banking landscape in the 21st century' seminar.
The NBFC sector has seen a lot of turmoil, starting with a series of defaults by Infrastructure Leasing & Financial Services (IL&FS), that forced the government to intervene and exposed weaknesses in the sector. Then Dewan Housing Finance Corp also entered a crisis phase making the RBI to keep close vigil.
The RBI was having regualar interaction with statutory auditors, credit rating agencies, credit information firms, mutual funds and banks having large exposures to NBFCs, he said.
"In addition to the four pillars of supervision -- on-site inspection, off-site surveillance, market intelligence and reports of statutory auditors (SAs) -- a fifth pillar of supervision in the form of periodic interaction with stakeholders, including statutory auditors, credit rating agencies, credit information firms, mutual funds and banks having large exposures to NBFCs has been instituted to have a clearer understanding of the emerging risks and developments in the sector," he said.
It would ensure availability of critical information, whenever required, he said.
On the co-operative banks, he said the RBI had developed a robust stress-testing framework for urban cooperative banks (UCBs). It also acts as early warning system for co-operative banks with timely identification of weak banks for appropriate action.
It's a shift from reactive to pro-active supervisory approach, intended to ensure surveillance of UCBs' vulnerabilities. Moreover, as on December 31, 2019, over 90 per cent of these banks are now on the core banking solution, although efforts are required to standardise solutions and have a robust set of internal controls implemented for improved outcomes.
The CAMELS (capital, asset quality, management, earnings, liquidity and systems & control) supervisory rating methodology for UCBs has also been revised. "We have taken steps to bring UCBs under the CRILC reporting framework and issued draft guidelines on exposure norms to mitigate credit concentration risk and enhancement in the priority sector lending targets to further financial inclusion," he said.
To improve governance, the RBI had issued guidelines on formation of the UCB board of management (BOM) with deposit size of Rs 1,000 crore, he said. "To have appropriate regulatory powers in respect of co-operative banks, almost on par with those over banking firms, certain amendments in the Banking Regulation Act, 1949 have been proposed," the RBI Governor said.
The RBI move follows the sanctionining of personal loans by PMC Bank in August by throwing of all rules to the wind. Also, it was over and above the Rs 2,500 crore loan that HDIL had ceased repaying and which the cooperative bank failed to classify as bad loan.
(IANS)
In a keynote address at the 7th SBI Banking and Economics Conclave, Das noted that medium term outlook still remains uncertain.
"Despite the substantial impact of pandemic in our daily lives, the financial system of the country, including all the payment systems and financial markets, are functioning without any hindrance," he said.
"The Indian economy has started showing signs of getting back to normalcy in response to the staggered easing of restrictions. It is, however, still uncertain when supply chains will be restored fully; how long will it take for demand conditions to normalise; and what kind of durable effects the pandemic will leave behind on our potential growth."
He elaborated that a multi-pronged approach adopted by the Reserve Bank has provided a cushion from the immediate impact of the pandemic on banks, however, the medium-term outlook is uncertain and depends on the Covid-19 curve.
"Policy action for the medium-term would require a careful assessment of how the crisis unfolds. Building buffers and raising capital will be crucial not only to ensure credit flow but also to build resilience in the financial system."
According to Das, the Reserve Bank has asked financial institutions to carry out a COVID stress test to see weaknesses in their balance sheet.
"We have recently advised all banks, non-deposit taking NBFCs and all deposit-taking NBFCs to assess the impact of Covid-19 on their balance sheet, asset quality, liquidity, profitability and capital adequacy for the financial year 2020-21.
"Based on the outcome of such stress testing, banks and non-banking financial companies have been advised to work out possible mitigating measures, including capital planning, capital raising, and contingency liquidity planning, among others. The idea is to ensure continued credit supply to different sectors of the economy and maintain financial stability," Das said.
In addition, he said that post containment of Covid-19, "a very careful trajectory has to be followed in orderly unwinding of counter-cyclical regulatory measures and the financial sector should return to normal functioning without relying on the regulatory relaxations as the new norm".
"The Reserve Bank is making continuous assessment of the changing trajectory of financial stability risks and upgrading its own supervisory framework to ensure that financial stability is preserved," he said.
"Banks and financial intermediaries have to be ever vigilant and substantially upgrade their capabilities with respect to governance, assurance functions and risk culture."
(IANS)
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Noting that India's financial system remains sound, Das, in his foreword to the RBI's latest Financial Stability Report, wrote that in the current environment, the need for financial intermediaries to proactively augment capital and improve their resilience has acquired top priority.
"In the evolving milieu, while risk management has to be prudent, extreme risk aversion would have adverse outcomes for all," he wrote.
The Governor's statement gains significance as concerns have been raised that banks are still risk-averse and are largely shying away from lending in general, except for the sovereign guaranteed ECLGS loans for MSMEs.
The Financial Stability Report for July 2020 also shows that bank credit, which had considerably weakened during the first half of 2019-20, slid down further in the subsequent period with the moderation becoming broad-based across bank groups.
"Subdued bank credit shows clear signs of risk aversion," the report said.
The Governor also said that currently there is growing disconnect between the movements in certain segments of financial markets and real sector activity.
The pandemic hit India in a period of growth moderation and the ensuing disruptions in demand conditions and supply chains have been aggravated by global spillovers, he added.
"Of late, signs of a gradual recovery from the nationwide lockdown are becoming visible," Das said.
(IANS)
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Das, however, said that he is asymptomatic and is feeling alright.
#BreakingNews: RBI Governor Shaktikanta Das tests positive for #Covid19; says he is asymptomatic (PTI) pic.twitter.com/Rj4ySJrhqN
— OTV (@otvnews) October 25, 2020
"I have tested COVID-19 positive. Asymptomatic. Feeling very much alright. Have alerted those who came in contact in recent days," he said in a tweet.
The governor said that he would continue to work from isolation and assured that the central bank's work will not be impacted.
"Will continue to work from isolation. Work in RBI will go on normally. I am in touch with all Dy. Govs and other officers through VC and telephone," he said.
(IANS)
"Even as the growth outlook has improved, downside risks to growth continue due to recent surge in infections in advanced economies and parts of India," he said.
"We need to be watchful about the sustainability of demand after festivals and a possible reassessment of market expectations surrounding the vaccine."
Besides, he said that monetary policy guidance in October emphasised the need to see through temporary inflation pressures and also maintain the accommodative stance at least during the current financial year and into the next financial year.
"A key source of resilience in recent months has been the comfortable external balance position of India supported by surplus current account balances over two consecutive quarters, resumption of portfolio capital inflows on the back of robust FDI inflows, and sustained build-up of foreign exchange reserves," he said.
"The Government's recent policy focus to enhance India's participation in global value chains, including through production linked incentives for targeted sectors, can leverage on the strong external balance position of India."
On the financial markets, he said conditions were benign at the start of the year but witnessed severe stress and dislocation as the Covid-19 pandemic unfolded.
"The Reserve Bank acted proactively and nimble-footedly to ease financial market conditions and mitigate risks with a slew of conventional and unconventional measures. Market participants responded with alacrity and together we have been able to ensure stable and resilient markets across all segments," he said.
"The Reserve Bank remains committed to fostering orderly functioning of financial markets and will continue to evaluate incoming information having a bearing on the financial markets and act, as needed, to mitigate any downside risks."
Furthermore, he cited that Reserve Bank has taken steps to usher in the next phase of reforms to accelerate the pace of financial markets' liberalisation.
"The broad approach driving the recent regulatory initiatives is that any person with a need to access financial markets should be able to do so with ease at minimum cost. Principle-based regulations for interest rate derivatives and foreign exchange derivatives aim at achieving this broad objective," he said.
"Users with limited or small hedging requirements have been allowed to enter into contracts equivalent of USD 10 million without the need to establish the existence of underlying exposures."
In addition, Das said that as a major milestone towards opening up of markets, banks in India have been permitted to deal in the offshore rupee derivative markets.
"The measure is expected to reduce the segmentation between onshore and offshore markets, apart from reducing volatility and the cost of hedging. Banks have also been permitted to undertake foreign exchange transactions beyond the usual onshore market hours, thus fostering real time market activity," Das said.
"In a complementary measure, exchanges and banking units in the GIFT City have been permitted to undertake Over the Counter (OTC) and exchange traded rupee derivatives."
(With IANS Inputs)
The benchmark repurchase (repo) rate has been left unchanged at 4 per cent, Governor Shaktikanta Das said while announcing the decisions taken by the central bank's Monetary Policy Committee (MPC).
Consequently, the reverse repo rate will also continue to earn 3.35 per cent for banks for their deposits kept with Reserve Bank of India (RBI).
He said MPC voted for keeping interest rate unchanged and continued with its accommodative stance to support growth.
The central bank had slashed the repo rate by 115 basis points since late March to support growth.
RBI had last revised its policy rate on May 22, in an off-policy cycle to perk up demand by cutting interest rate to a historic low.
The 26th meeting of the rate-setting MPC with three external members -- Ashima Goyal, Jayanth R Varma and Shashanka Bhide -- began on December 2. This is the second meeting of these members who are appointed for a term of four years.
The government moved the interest rate setting role from the RBI Governor to the six-member MPC in 2016. Half of the panel, headed by the Governor, is made up of external independent members.
MPC has been given the mandate to maintain annual inflation at 4 per cent until March 31, 2021, with an upper tolerance of 6 per cent and a lower tolerance of 2 per cent.
(PTI)
The benchmark repurchase (repo) rate has been left unchanged at 4 per cent, Governor Shaktikanta Das said said while announcing the decisions taken by the central bank’s Monetary Policy Committee (MPC).
“It also unanimously decided to continue with the accommodative stance as long as necessary to sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward,” he said.
Consequently, the Marginal Standing Facility (MSF) rate and the bank rate remain unchanged at 4.25 per cent. The reverse repo rate will also continue to earn 3.35 per cent for banks for their deposits kept with RBI.
This is the first bi-monthly meeting of MPC in the current financial year and after the government’s recent mandate to maintain annual inflation at 4 per cent with an upper tolerance of 6 per cent and a lower tolerance of 2 per cent for another five years.
The central bank has retained growth projection of 10.5 per cent for the current financial year as was estimated in its February bi-monthly policy.
MPC saw inflation edging up to 5.2 per cent in the first half of the new fiscal from 5 per cent in the January-March period and moderate to 4.4 per cent in Q3 of FY22.
The governor said MPC unanimously voted for keeping interest rate unchanged and decided to continue with its accommodative stance to support growth.
This is the fifth time in a row that MPC has decided to keep the policy rate unchanged. RBI had last revised its policy rate on May 22, 2020 in an off-policy cycle to perk up demand by cutting interest rate to a historic low.
The central bank had slashed the repo rate, the rate at which banks borrow from the RBI, by 115 basis points between March and May 2020 to support growth.
Retail inflation rose to a three-month high of 5.03 per cent in February mainly on account of higher food prices. The Consumer Price Index (CPI) based retail inflation stood at 4.06 per cent in January. At the same time, a fresh wave of COVID-19 has resulted in over 90,000 cases per day and the situation has led to localised lock-down impacting economic activities.
To provide clarity over its bond buying programme through Open Market Operations (OMO), Das announced Rs 1 lakh crore target for the first quarter under the new instrument called G-sec acquisition programme or G-SAP 1.0.
The first purchase of government securities for an aggregate amount of Rs 25,000 crore under G-SAP 1.0 will be conducted on April 15, 2021.
He assured that RBI is committed to ensuring ample system liquidity in consonance with the accommodative stance of MPC.
“When I say ample liquidity, I mean a level of liquidity that would keep the system in surplus even after meeting the requirements of all financial market segments and the productive sectors of the economy,” he said.
The Reserve Bank will of course continue to do whatever it takes to preserve financial stability and to insulate domestic financial markets from global spillovers and the consequent volatility, Das added.
To provide additional liquidity to states, RBI has decided to accept the recommendations of an Advisory Committee constituted by it to review the Ways and Means Advance (WMA) limits for State Governments/UTs and other related issues.
Accordingly, it has been decided to enhance the aggregate WMA limit of states and UTs to Rs 47,010 crore, an increase of about 46 per cent from the current limit of Rs 32,225 crore which was fixed in February 2016.
“Further, it has also been decided to continue the enhanced interim WMA limit of Rs 51,560 crore granted by RBI due to the pandemic for a further period of six months i.e. up to September 30, 2021,” he said.
Das further said that to nurture the still nascent growth impulses, it is felt necessary to support continued flow of credit to the real economy.
Accordingly, liquidity support of Rs 50,000 crore for fresh lending during 2021-22 will be provided to All India Financial Institutions (AIFIs).
He announced that Rs 25,000 crore will be provided to NABARD, Rs 10,000 crore to NHB and Rs 15,000 crore to SIDBI.
It is to be mentioned here that special refinance facilities of Rs 75,000 crore were provided to AIFIs during April-August 2020.
The central bank also announced relaxation in the period of parking of External Commercial Borrowing (ECB) proceeds in term deposits.
The meeting, jointly chaired by Finance Minister Nirmala Sitharaman and Reserve Bank of India Governor Shaktikanta Das, was the first meeting of the BRICS Finance Ministers and Central Bank Governors under India’s chairship in 2021.
As BRICS chair, India’s approach is focused on strengthening intra-BRICS cooperation based on continuity, consolidation, and consensus.
At the meeting, BRICS Finance Ministers and Central Bank Governors discussed financial cooperation agenda set by India for 2021 – the global economic outlook and response to Covid-19 pandemic, New Development Bank (NDB) activities, social infrastructure financing and use of digital technologies, and cooperation on customs-related issues.
The meeting also discussed IMF reforms, fintech for SMEs and financial inclusion, BRICS Rapid Information Security channel and BRICS Bond Fund.
On the BRICS priorities and agenda for 2021, Sitharaman said that the efforts should be made towards delivering outcomes that reflect the needs and aspirations of BRICS in particular, and emerging markets and developing economies in general.
She emphasised the importance of BRICS in responding to the Covid-19 crisis through policy support and enhancing international coordination.
Sitharaman also highlighted that world’s largest vaccine drive by India is under way. India has supplied 64.5 million vaccine doses to 84 countries.
On the importance of social infrastructure and use of digital technologies, she underscored the merit in engaging with private sector and exploring the innovative financing models.
Sitharaman stated that the Prime Minister’s Health Insurance Scheme using an output-based funding model has triggered a major private investment cycle in health-care infrastructure, enabling significant expansion of health-care services to vulnerable citizens.
She also talked about thematic priorities for the New Development Bank for discussion during 2021 and the issues of membership expansion and called for greater coordination among BRICS member countries on the issues of 16th general review of Quotas of IMF.
The benchmark repurchase (repo) rate has been left unchanged at 4 per cent, Governor Shaktikanta Das said while announcing the decisions taken by the central bank's Monetary Policy Committee (MPC).
Consequently, the reverse repo rate will also continue to earn 3.35 per cent for banks for their deposits kept with RBI.
He said MPC voted for keeping interest rate unchanged and decided to continue with its accommodative stance to support growth.
The central bank had slashed the repo rate by 115 basis points since late March 2020 to support growth.
This is the fourth time in a row that MPC has decided to keep the policy rate unchanged. RBI had last revised its policy rate on May 22 in an off-policy cycle to perk up demand by cutting interest rate to a historic low.
The 27th meeting of the rate-setting MPC with three external members -- Ashima Goyal, Jayanth R Varma and Shashanka Bhide -- began on February 3. This is the first meeting of the rate setting panel after the Budget 2021-22, announced this week, projected a nominal GDP growth rate of 14.5 per cent and a fiscal deficit of 6.8 per cent for the financial year beginning April 1.
The government moved the interest rate setting role from the RBI Governor to the six-member MPC in 2016. Half of the panel, headed by the Governor, is made up of external independent members.
MPC has been given the mandate to maintain annual inflation at 4 per cent until March 31, 2021, with an upper tolerance of 6 per cent and a lower tolerance of 2 per cent.
Speaking at the Times Network India Economic Conclave, the Governor said that digital currency is one thing and the cryptocurrencies which are being traded in the market is something else.
The statement from the central bank governor gains significance as the government is set to come up with a Bill on cryptocurrency wherein it is likely to ban all such cryptocurrencies.
"Both RBI and government are committed to financial stability. We have flagged certain concerns around cryptocurrencies which are being traded in the market. We have flagged certain major concerns to the government, and it is still under examination in the government and government will come out with a decision or sooner than later," he said.
Das was of the view that there is no difference of opinion between the RBI and the Centre on cryptocurrency.
On the forex market and the Indian rupee, he said that it is a dynamic situation, and there are two objectives of the RBI's forex intervention -- to prevent excessive volatility of the exchange rate of Indian rupee against the dollar, and the second theme is that emerging market economics need to build up their own buffers.
Emphasising that emerging market economies should build up their forex buffers, Das said that the recent framework of International Monetary Fund also recognises that forex intervention has become necessary for emerging market economies to deal with volatile situations and to deal with adverse situations.
"We are ready always to keep it (forex rate) stable because certainty and stability is good is good for investors. It is good for importers, it is good for exporters, in fact it is good for all stakeholders in the economics."