RBI Monetary Policy Takeaways: Governor Shaktikanta Das On More Hikes, Indian Economy, Banks And More
The RBI has increased the repo rate by 25 basis points to 6.50%. Here are the key takeaways of Governor Shaktikanta Das' speech.
KEY HIGHLIGHTS
Key Takeaways From MPC Announcement
1. RBI Hikes Repo Rate By 25 Basis Points
The Monetary Policy Committee voted to raise policy repo rate by 25 basis points to 6.50%. Of the six members, four voted in favour of hiking the rates.
The MPC decided to remain focused on withdrawal of accommodation.
2. Outlook On Rate Hikes
RBI Governor Shaktikanta Das said it is not possible to indicate future course of rates. Das, during the press conference, refrained from giving a forward guidance on rates.
"We will be extremely watchful on incoming data," Das said.
The monetary policy will continues to be agile, alert to moving parts of inflation trajectory.
3. Inflation and Growth Expectations
RBI Governor Shaktikanta Das pegged the real GDP at 6.4% for fiscal 2024.
Q1 growth is seen at 7.8%, Q2 at 6.2%, Q3 at 6% and Q4 at 5.8%.
The risks of GDP projection are evenly balanced.
Meanwhile, for fiscal 2024, Das expects CPI to be 5.3%.
Inflation seen at 5% in Q1, 5.4% in Q2 and Q3, and 5.6% in Q4.
Stickiness of core inflation is a matter of concern.
Need to see decisive moderation in inflation.
Have to remain unwavering in commitment to bring down CPI inflation.
Monetary policy must be tailored to ensure durable disinflation process.
Each component of headline inflation and beyond that, each component of food, core and fuel inflation – the momentum is very closely examined by the RBI MPC.
Moderation in vegetable prices in last two months have more than offset the price momentum in cereals.
Future trajectory of each component is built into RBI’s projections on inflation.
4. Das Lists Seven Key Highlights of Economy
Indian economy remains resilient, withstanding successive global shocks. Each shock came with unprecedented suddenness, spill-overs.
Inflation has shown signs of moderation and the worst is behind us. But, there are concerns around core inflation. We can’t take eyes off inflation.
Now witnessing conducive conditions of macro stability as reflected in moderation in inflation, fiscal consolidation and the expectation that the CAD is likely to narrow.
Indian rupee has remained one of the least volatile among Asian peers in 2022 and continues to be so this year too.
The real policy rate has moved into positive territory and the banking system has exited from the chakravyuh of excess liquidity without causing excess disruption. Monetary policy transmission is picking up.
On liquidity, RBI will remain flexible and responsive to productive sections of economy.
RBI stand resolute to deal with all future challenges.
5. RBI On Adani Group Exposure
RBI Governor, while responding to a question regarding the exposure of banks to Adani Group, said that banks don't lend on the basis of market capitalisation.
Banks lend on the basis of the strength, fundamentals of the company, he added.
The appraisal methods of Indian banks have significantly improved over the years, Das said.
Indian banking sector and NBFCs continue to be resilient and strong, he added.
RBI Governor On Central Bank Digital Currency Pilot
More than 50,000 users, 5,000 merchants have taken part in retail CBDC pilot, says Das.
As much as 7.7 lakh small value transactions have taken place till recently.
Regarding the full launch, Das says, “We want the process to happen, but we want it to happen gradually and smoothly. We don't want to do something without actually understanding the actual impact of such a launch.”
RBI To Be Responsive To Productive Sectors For Liquidity Requirement: Das
We will be responsive to the productive sectors of economy on requirement for liquidity, says Das.
Beginning of this financial year, the liquidity was Rs 7-8 lakh crore.
Now the daily LAF is around Rs 1.6 lakh crore.
The Liquidity Coverage Ratio of the banks is quite a bit more than the norms require.
The Certificate of Deposit ratios are also at very reasonable levels.
There is capacity with banks to continue lending operations.
Difficult for me to pinpoint and give a number on ideal system liquidity.
Appraisal Methods Of Banks Significantly Improved Over Years: Das
When banks lend money to a company or group, they don’t lend basis the market capitalisation, says Das.
Banks lend on the basis of the strength, fundamentals of the company.
Appraisal methods of Indian banks have significantly improved over the years.
Indian Banking Sector, NBFCs Continue To Be Resilient And Strong: Das
Individual cases and their numbers are not discussed in public domain.
In the last 3-4 years, RBI has taken a number of steps to strengthen resilience of Indian Banks.
Have come out with clear guidelines to regulate governance in Indian Banks.
Have issued guidelines on functioning of audit committees, risk management committees.
Have made it mandatory for appointment of chief risk officer, chief compliance officer in banks.
We have rationalised, in last two years, the large exposure norms.
Difference Between Credit And Deposit Growth Narrowed, But Exists: Deputy Governor Patra
The difference between credit and deposit growth has narrowed, but it exists.
It’s up to banks to mobilise deposits on their own to meet the gap.
