RBI Governor said that monetary policy has a certain role in the economy, it can't play all roles and thus all stakeholders, including private sector players, have to play their part.
RBI governor Shaktikanta Das said that a fall in the GDP growth to a six-year low of 5 per cent came as a surprise. The GDP growth figure of 5 per cent in the fiscal first quarter April-June looks much worse than predicted, he added. In separate interviews to CNBC TV18 and ET Now, Das said that the government is fully aware of the fiscal challenges, adding that the signs of a slowdown were visible as early as February and he knew that a few decisive policy actions were needed. Calling the slowdown cyclical, Shaktikata Das said that he will have to see if the slowdown sustains in the second quarter of the current fiscal as he is not able to talk about recovery yet.
Highlights from RBI Governor Shaktikanta Das’ interviews to CNBC TV18 and ET Now:
- Shaktikanta Das said that NBFCs and finance-related companies do not have a legal framework like IBC for resolution, and that there is a need for a formal mechanism with the legal backing to deal with financial entities.
- RBI Governor Das said that the market expects RBI to certify NBFCs asset quality review (AQR) but it can’t be handing out certificates. Instead, there is a strong need for NBFCs to organise an internal asset quality review (AQR) and report results.
- He mentioned that many decisions are taking place between the government and the RBI on tackling NBFC crisis.
- RBI is not asking any bank to lend or not to lend to any NBFC, he said.
- He added that NBFCs have been under stress and the RBI is concerned about it. He assured that the central bank is keeping a close watch on the top NBFCs, including HFCs and the team is in touch with NBFC promoters to ensure the obligations are met.
- He said that the supervision of housing finance companies will continue to be done by the NHB as the RBI does not have the manpower to take up supervision of HFCs at this moment.
- The report on liquidity framework has taken more time than expected but the liquidity framework report is almost ready and will be public soon, said Shaktikanta Das.
- He added that the larger banks have synergies in place due to their presence in many regions. The transition process has to be managed well for bank mergers to be successful.
- He mentioned that bank supervision is a continuous process for RBI.
- Talking on the interest rate reduction, he said that the objective of rate reduction is to boost demand and the real economy.
- He added that monetary policy has a certain role in the economy, it can’t play all roles and thus all stakeholders, including private sector players, have to play their part.
On the adoption of external benchmarks for banks, Shaktikanta Das said that the banks are now more prepared to adopt an external benchmark regime and a few banks chose to adopt the external benchmarks themselves. He added that the central bank did not arm-twist any bank in adopting the external benchmarks and have left it entirely on banks to calculate loan interest rates in the new regime. However, he said that the RBI will do a fit and proper test for all banking licenses, including fintech companies.