RBI Governor Shaktikanta Das On Economy, Banks And Regulations: Exclusive

The Reserve Bank of India, over the last two years, has used multiple tools apart from the monetary policy to ensure appropriate liquidity in a slowing Indian economy. Along with the government, it played an active part in pulling the country’s financial sector out of bad loan and liquidity crises, all the while keeping inflation within the mandated range.In this conversation with BloombergQuint, RBI Governor Shaktikanta Das delves into the central bank’s priorities, the nation’s economy, domestic banks, regulations and the way forward.Watch the conversation here:.Here are the key highlights from the interview:.RBI’s Top Priorities At This Juncture.A central bank like Reserve Bank has multifarious responsibilitiesRBI’s domain much wider than Bank of England or U.S. Federal ReserveMain focus is maintaining financial stability, supporting growth and price stabilityFocus is also on sharpening regulation and supervisory functions.Is Any SBI-Yes Bank Move Due To An RBI Nudge?.Do not wish to comment on a media reportRBI remains committed that financial and banking system is strong and stableBanking system remains safe and stable.Government Puts Yes Bank Under Moratorium, RBI Supersedes Board, Withdrawals Capped At Rs 50,000.The Many Accidents In The Financial SectorGovernment's capital infusion helped addressing the challenges that AQR brought on public sector banksChallenges from AQR largely addressed, NPA picture now better than what it was in 2014-2015Have frequently issued guidelines to improve governance in public and private sectorHave stepped up the depth and quality of RBI’s supervision of banksHope to issue more guidelines on governance of public and private sector banksBank governance guidelines currently work-in-progressHave identified some areas that need improvement over the last 18 months.RBI’s Responsibilities ‘Much Wider’ Than U.S. Fed, BOE: Governor Shaktikanta Das.Remaining Risks To NBFCs.Have only recently begun regulating housing finance companiesRemain in constant contact with National Housing BankNHB will bring any areas of concern to RBI’s noticeSome HFCs coming out of difficulty, need to raise capital to improve liquidityRisk to system from housing finance companies is now much less.Improving RBI’s Supervisory System.First layer of fraud control remains with the regulated entityRBI is not sitting at the financial entity round the clock monitoring each operationRBI expects bank and NBFC managements to have robust internal mechanisms to check fraudHave to ensure that same kind of fraud is not repeated, in that organisation or elsewhere.Will Higher Penalties Deter Fraud?.RBI’s enforcement department has imposed big amounts as penaltiesRBI’s penalty on listed bank or NBFCs comes with reputational impact.RBI To Set Up Department That Would Focus On Fintech: Exclusive.Will Covid-19 Delay The Recovery?.Definitely see global growth being pulled down due to coronavirus outbreakSARS pulled China’s growth down by 1% at a time when China was far less vital to world economyDon’t think IMF’s current 0.4% growth impact projection is the final word on coronavirus hitIndia more integrated to global economy than during SARSBut India is still not a major part of global value chainGrowth impact on India may not be as much as it is in some other countriesSome growth impact on sectors in trade and manufacturing, which have large interlinkage with ChinaWill be in better position to assess growth impact of coronavirus by the time of the next MPC meet.Does RBI Need To Make An Emergency Move?.If required, the RBI will act as and when required and as in the past, the RBI will be proactive and act in time.Shaktikanta Das, Governor, RBI.What’s Led To This Stretch Of Low-Growth?.Have been in a period of low growth around the worldTwin balance-sheet problem, bank stress, IL&FS crisis successively weighed down on economyJust as things were beginning to look up, we now have the coronavirus problemHave seen sentiment turning negative due to coronavirus, In India and around the worldSeeing greater coordination among governments and central banks.India’s Home-Grown Growth Hurdles.Series of government measures over last year have tried to address some domestic factors that hurt growthExpect this Rabi season to be a bumber crop, will contribute to rural incomesLow food inflation has meant lower farm incomes, some increase there might mean better incomesDo see some improvements in some sectors, but too early to say demand has revivedNeed to wait for green shoots to be visible in some areas to conclude that things are improving.Dichotomy Between MPC & RBI Messages?.MPC focused on growth too, no dichotomy between thinking of RBI and MPCMeasures taken in last MPC was mainly to ensure better transmissionAim of last MPC’s moves was not any sort of ‘yield management’Effort was to ensure transmission of policy rate reduction to corporate bond marketYields have come down ‘in the process’, not the primary aim.Aim Of RBI’s LTRO.LTRO done to ensure better monetary policy transmission & credit flowCRR dispensation also done for better credit flow, reduce banks’ cost of funds.RBI’s Toolkit Going Into The Next MPC Meet.MPC will decide what to do when it meets, central bank always has several tools.Is RBI Stepping In Where The MPC Isn’t?.MPC has a defined mandate, all else that’s been done is not in its domainMPC does not go into the liquidity framework, hence was ‘Part-B’.Full Service Versus Focused Central Bank.RBI has been mandated to undertake several responsibilitiesInflation management is one of the important objectives, but there are others too.Supreme Court Strikes Down RBI’s Cryptocurrency Circular.Studying Supreme Court’s order, it has clearly upheld RBI’s regulatory powersWill decide on way forward on crypto after thorough examinationRBI to set up an exclusive fintech department to give focus on digital transactions & technology.Intense Competition In The Payments Space.RBI keeping track of what is happening in the payment spaceGovernment has already issued guidelines for those that are in e-commerceWill watch and, if required, intervene at the appropriate timeShould not kill something new that’s happening right on day-oneExpect those whose capital is in the payment space to be responsible with it.New Umbrella Entity For Retail Payments.Want to disperse any concentration risk in retail paymentsWant to ensure right amount of competition in retail payment frameworkNeed ‘a few more players’ besides NPCI.Experiments With ‘Digital Banks’.See ‘digital banks’ happening, now or in the futureDoing KYC, application, and subsequent lending can happen digitally.‘RBI’s Reputation Remains Intact’.Would not agree with assessment that RBI has lost its ‘pristine image’Have seen bank failures happen frequently in U.S. but never in IndiaA major bank has never been allowed to collapse in IndiaLast 4-5 years has had challenges, institution’s response is what’s importantRBI has responded to all the challenges that have come before itResponse to 2008 crisis or 2013 taper tantrum can’t be weighed as ‘reputational risk’Even today, RBI enjoys a lot of trust and public confidenceSeeing RBI ready react to coronavirus, did to growth slump, NBFC crisis, post-AQRAs an organisation, RBI’s reputation and robustness remain intact

RBI Governor Shaktikanta Das On Economy, Banks And Regulations: Exclusive

Exclusive interview with RBI Governor Shaktikata Das on the economy, banks, regulations, and more.

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