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Participants from the Reserve Bank of India:
Shri Sanjay Malhotra - Governor, Reserve Bank of India
Shri Swaminathan J - Deputy Governor, Reserve Bank of India
Dr. Poonam Gupta - Deputy Governor, Reserve Bank of India
Shri Shirish Chandra Murmu - Deputy Governor, Reserve Bank of India
Shri Rohit Jain - Deputy Governor, Reserve Bank of India
Shri Sanjay Kumar Hansda - Executive Director, Reserve Bank of India
Shri Indranil Bhattacharyya - Executive Director, Reserve Bank of India
Shri Ravi Shankar - Executive Director, Reserve Bank of India Moderator:
Shri Brij Raj - Chief General Manager, Reserve Bank of India Brij Raj:
Good afternoon, everyone. Welcome to this Post-Policy Press Conference, third for the financial year 2026-2027. We have with us Governor, Reserve Bank of India, Shri Sanjay Malhotra; along with Deputy Governors, Shri Swaminathan J; Dr. Poonam Gupta; Shri Shirish Chandra Murmu; and Shri Rohit Jain. We also have with us Executive Directors, Shri Sanjay Kumar Hansda; Shri Indranil Bhattacharyya; and for the first time, Shri Ravi Shankar. I also welcome my other colleagues from the Reserve Bank. Sir, there are 26 participants from the media. And before we begin, we have two housekeeping announcements. First, I request the media participants to please stick to only one question. I repeat, only one question, so that everyone gets a chance. Second, I request everyone to please switch on the mic while speaking, so that those watching the live telecast are able to hear clearly. And once you have finished speaking, please switch off the mic. Sir, with your permission, I will now call out the names. Sanjay Malhotra:
Yes, please do so. Even I want to emphasize that, please ask only one question. And in case you ask two questions, then I have the option to answer which question I will answer. So, please be very sure, which question you want to ask. And in case there are questions left, which I doubt there will be, we can come back. So, don't think that your question will go unanswered, provided it's a different question which has not been asked by any of the 26 participants who are here. So, kindly let's follow this rule and keep it brief. Brij Raj:
Thank you, Sir. I will request Ms. Latha Venkatesh from CNBC TV18 to please ask the first question. Latha, please. Latha Venkatesh, CNBC TV18:
Thank you very much, Mr. Brij Raj, Governor and everybody. Sir, the market found your policy statement more dovish than expected. And their reasoning was, if you look at your inflation forecasts, it is above 5% for almost one year. That means well above your target by 100 basis points, well above the given target. As well, the real rate, therefore, becomes negative for a better part of the next six months or so. So, is it that you are going to concentrate on core inflation and when you deduct, you're looking at T-bill, if you take the T-bill one year ahead and deduct the one year ahead core, only then you come somewhere near a real rate of 1.4%. I mean, are you going to be reconciled to a negative real rate or a very, very low real rate? Sanjay Malhotra:
So, let me first of all say, we are neither dovish nor are we hawkish. We feel that this is the right policy rate for the given growth-inflation dynamics that we are in today and the outlook that we have projected ourselves. There is a lot of uncertainty which will, of course, play out. The framework is very clear. I don't think there should be any confusion about the framework. Our target is headline, it’s not core or core excluding pressure. It is the headline inflation, which is the target which has been given to us and we'll continue to be guided by the headline Inflation. And it will be our commitment, it is our endeavour to bring the headline inflation in line with the target over the medium term, as was mentioned even earlier. Now, why we look at core - and core core is because we need to know as to what the underlying inflation is and where headline or underlying inflation is going to converge going forward, because headline inflation because of food and now because of fuel, because of the external shocks, can be very volatile. And so, as I mentioned even in the earlier press conference, that this volatility is not something that we would like to bring in even in our policy repo rate. So, it's in the medium term that we target our policy - medium term, target our headline inflation. And accordingly, we will take action as may be required, given the outlook and how the growth-inflation dynamics play out. Brij Raj:
Thank you, Sir. We will take some more questions from our left side before we come to this side. I will now request Manojit Saha from Business Standard to ask his question. Manojit, please. Manojit Saha, Business Standard:
Thank you, sir. My question is on FCNR(B) scheme. Is there an option for you to close the scheme prematurely before the deadline in case a certain amount of inflow is coming? You may have a target in your mind. So, because I'm asking this because there's a cost to this scheme because RBI is subsidizing it. And there's a view that the situation is now not as bad as 2013, where India was considered in fragile five, forex reserves were only $75 billion as compared to $700 billion around (now). So, that concern is there. So, is there an option to close it prematurely once you get the amount of deposits which you may have in your mind? Sanjay Malhotra:
We have got robust flows, as you have mentioned. And we do hope to get good, healthy flows, going forward. As of now, there is no proposal under consideration to close the scheme prematurely. We will keep you posted on this. Brij Raj:
Thank you, Sir. I will now request Anup Roy from Bloomberg to ask his question. Anup, please. Anup Roy, Bloomberg:
Thank you, sir. Sir, we have seen $40 billion being mobilized by the FCNR(B) scheme and yet, the Rupee has not appreciated much. I am just trying to understand what is happening there. Is it because you are squaring off your forward position and the dollar is not coming into the market? Can you please let us know what is happening there? Sanjay Malhotra:
I think the underlying fundamentals of our Indian economy are very strong, as I have earlier mentioned. There can be an argument, as some people have made, that it is perhaps you know on nominal or real effective exchange rate terms it may be undervalued. There is a lot of uncertainty. It is quite possible going forward as the tensions and the conflict deescalates, it is quite possible that the Rupee may further strengthen. It has strengthened over the last one month or so. It has strengthened from 97 levels now to about 95 levels. So, it has strengthened. And our policy has always been that the markets determine the prices level and the band. We don't pursue. We only target - we only intervene in case there is an excessive volatility, there are speculative pressures that are getting built in. And it will be our endeavour that the trajectory for Rupee remains orderly, and there is no disruptive movement or there is no expectation, you know, self-fulfilling expectations getting built into the exchange rate. Anup Roy:
Thank you. Brij Raj:
Thank you, Sir. I will request Hamsini Karthik from Moneycontrol to ask her question. Hamsini, please. Hamsini Karthik, Moneycontrol:
Thank you, sir. Good afternoon. My question is also pertaining to FCNR(B). I would like to understand if you could please help us with the geographical split of where this deposit flow has really come from and whether the deposit flow has ticked all the boxes in terms of BoP management, liquidity, and forex from an RBI standpoint? Sanjay Malhotra:
Yes, as of now, it has ticked all the boxes. You asked two questions, but they are related, so it's okay. Hamsini Karthik:
Thank you. Sanjay Malhotra:
And your second question is on geographies. We don't have. We don't collect the geographies. But the flows, as I said, have been robust. We had even before these measures a very strong and a comfortable external position. This further fortifies our external position, including the BoP. Hamsini Karthik:
Thank you, Sir. Brij Raj:
Thank you, Sir. I will request Ekta Suri from Zee Business to ask her question. Ekta, please. Ekta Suri, Zee Business:
Sir, today you mentioned in a statement in your policy that the margins of the banks are no longer as lucrative or as good or as better as they used to be earlier. So, Sir, has the RBI taken this into account, and is that one of the reasons why you issued a paper on differential rates for bulk deposits? Is that one of the reasons? And will the RBI track whether banks are favoring or giving extra money to certain parties on bulk deposits in the name of marketing expense or in some other way? Will the RBI track that? And similarly, when results come out, banks temporarily show inflated CASA by taking fixed deposits. So, how will the RBI address this, Sir? Sanjay Malhotra:
The interest rate guidelines that we issued earlier, those were not because of NIMs, because of the drop in NIMs. The underlying cost of deposit, which can be different for different depositors, because our directives, especially for LCR, are different. So, keeping that in mind, we issued those guidelines. Brij Raj:
Thank you, Sir. I will now request Anurag Shah from ET Now Swadesh to ask his question. Anurag, please. Anurag Shah, ET Now Swadesh:
Namaste, Sir. Sir, a big announcement has been made today by you regarding loan interest rate calculation. Is this a big announcement similar to the one you made regarding mis-selling, which is coming into effect from January 1, and which received a lot of appreciation, even from other regulators? So, what relief will common people taking loans worth crores get from these loan interest rate calculation rules, when will these rules be implemented, and in what way will the RBI issue guidelines so that people get relief? Sanjay Malhotra:
The main reason for these interest rate rules is that different instructions were issued by our various regulated entities. So, to rationalize and standardize them, we have issued these rules. And through this, transparency will also increase because everyone will know what the interest rates are and how they are set. So, primarily this is a rationalization exercise, which will further enhance consumer protection. Anurag Shah:
So, people should not think that EMI will change? EMI will remain the same, but you will understand your interest and principal in a proper, transparent manner. Latha Venkatesh:
Sir, could you please repeat? Because that was to be my second question also. The market is very confused what do you mean by ‘all regulated entities’? Will NBFCs have to declare EBLR? All those confusions are there. Manojit Saha:
Will NBFCs have to have external benchmark? Sanjay Malhotra:
All those details will be there in the draft guidelines that we are coming out with. So, please wait for those guidelines. All the details are over there. It is not a major change, as I have mentioned to you. There is no major change in requirement as you are referring to with regard to NBFCs and bringing them on to EBLR, etc. There is no major change. There is only a rationalization. Perhaps DG Shirish can further clarify. Shirish C. Murmu:
You are right, Sir. You have to wait for the circular to come out. Only thing I can tell is no major change. And emphasis is on transparency and it is basically conduct-related. So, don't look at the substantive part, but nevertheless, wait for the circular, it will come out soon. Brij Raj:
Thank you, Sirs. We will now take a few questions from the right side. I will request Sangita Mehta from Economic Times to ask her question. Sangita, please. Sangita Mehta, Economic Times:
Thank you. Sir, in your policy statement, you have said that transmission of policy rates have moderated. And now with the swap window being opened, we expect liquidity to surge, and it has surged, and might surge further. Do you expect banks to pass on the benefits of liquidity to the customers, because banks are already talking about improving NIMs and things like that? So, it's kind of important to understand that. Sanjay Malhotra:
Liquidity will obviously help everyone. It was required but let me mention that the liquidity may be in surplus only, you know, for the very short term. It may peak around in Q2, around September or so. And going forward, it should get absorbed because of our normal needs of the economy through increase in currency in circulation, higher requirement for reserves because of deposit growth. We also have some forwards which are getting matured. So, overall, of course, you know, it will help, but it is not something that is extraordinarily high liquidity. Sangita Mehta:
Does it answer that, would you expect banks to still have some pass on…? Sanjay Malhotra:
As I mentioned, it is not substantial. So, to that, it will only help at the very margins. It's not extraordinary or substantial over a very short period of time. I mean, this is the kind of liquidity that we even otherwise, every year, you know, through OMOs and other means, through swaps, we provide this kind of a liquidity. Now, a lot of it, of course, will depend on the amount of FCNR(B) deposits that we will get, but it will more or less, it should get absorbed in the medium term. Brij Raj:
Thank you, Sir. I will request Jaspreet Kalra from Thomson Reuters to ask his question. Jaspreet, please. Jaspreet Kalra, Thomson Reuters:
Thank you, sir. Governor, my question relates to succession planning at banks. There have been instances where banks have taken longer than a six-month renewal cycle for the top leadership, some other places, CEOs have left within one term. Given the ambition for India to have larger banks that can have a global reach, analysts have also pointed out that the tight grip on compensation, etc., for top talent at banks can have a limiting impact on the sort of talent banks themselves can draw. Do you see room to sort of review some of these rules that are in place and maybe relax some of them going forward? Sanjay Malhotra:
There is no proposal as of now. Jaspreet Kalra:
Do you not see a need as well, given the ambition to have larger banks? Sanjay Malhotra:
We obviously have a need - we all obviously would like and aspire to have more and more banks. But whether it is coming in the way or not, as I mentioned, has not been examined by us, and there is no proposal in this regard which is pending. Brij Raj:
Thank you, Sir. I will request Piyush Shukla from NDTV Profit to ask his question. Piyush, please. Piyush Shukla, NDTV Profit:
Good afternoon, Governor, DGs. Thank you, Brij sir. Sir, yesterday the government has made some amendments to the Payments Act. Now, there is chatter that there could be - you know, government may levy MDR on certain transactions, whether above ₹2,000, or it could use that on large retailers. You have earlier mentioned how somebody has to bear a cost for this public infrastructure utility. I want to understand from RBI, will we look at transaction size? Will we target certain retailers? What is the strategy going ahead, if you can share some views on this front, Sir? And last time, Sir, you had said that the upper layer list of NBFCs will come out very soon. So, how soon will it come, Sir? Sanjay Malhotra:
So, your first question I will answer is that it is very premature right now. The government is still carrying out the amendment. The costs have to be paid by someone. I mean we all want that this public infrastructure should continue to strengthen, become more efficient, etc. We'll continue to do that. That's our primary focus as of now. Let's wait and watch for further developments on this. I don't have anything more to add. Piyush Shukla:
Yes, will the user get charged? Because if you're levying a fee on a merchant, eventually it passes on to customer. So, the goal is to have 800 million transactions a day or so. Sanjay Malhotra:
Let's wait. It's premature right now. But please keep in mind also that ultimately it is the consumer in some way or the other who's paying it already. So, it may not be the same consumer. It may be, the general economy, and you don't get to see it directly. But already it's, to answer partly your question, whether it gets passed on somehow, it's already getting passed on. It may not be directly on to the very the user pays principle, but someone is paying the cost. This is what I meant. Someone will have to pay the cost. I said this earlier, and even now I'm saying so. What is important is that we continue to invest, and we continue to find the means, whether it is through MDR or other things. I think those are matters of detail. Let's wait and see how the situation evolves going forward. Brij Raj:
Thank you, Sir. I will request Ankur Mishra from ET Now to ask his question. Ankur, please. Ankur Mishra, ET Now:
Thank you, Brij sir, and good afternoon, Governor. First of all, I just wanted to get what is the assumption on crude and rupee? Please don't consider it as a question. To ask on, I want to understand your sense more on GDP front. In last to last policy, of course, FY 27 forecast was 6.9%, then it came to 6.6%, and now we are at 6.7%. Given in the first quarter itself you're saying 7% growth is possible. Is there a scope of overall 7% growth for FY27, which is possible considering the fact that the data which has come in the past also has been better than what was forecasted? Sanjay Malhotra:
The 6.7% growth that we have estimated - the outlook that we have given is an estimate, and we have also mentioned that the risks are evenly balanced on both sides. We also give a fan chart to give the relative probability distribution. So, if you look at the fan chart, it will suggest that there is a possibility that the growth, to answer your question, there is a possibility that the growth may be 7% or more. Brij Raj:
Thank you, Sir. I will request Shayan Ghosh from Mint to ask his question. Shayan, please. Shayan Ghosh, Mint:
Governor, I wanted to understand, so in April, RBI had asked banks to submit a Board-approved policy on AI-related cybersecurity resilience to RBI. And within a couple of months, we have seen a large bank facing a cyber incident where a lot of customer data was put on the public domain. Will there be a cost to such incidents in the banking sector when banks fail to adhere to these guidelines, or they are not prepared enough to counter these attacks? Sanjay Malhotra:
The IT systems of our major banks and big regulated entities are quite strong, robust. They have put in place checks and balances to ensure that they are secure. We have not only guidelines and regulations, we also have a supervision which is done very regularly. Any shortfalls or vulnerabilities are pointed out, measures to be taken to further strengthen the systems are suggested. They are followed up for, they are monitored, they are followed up to ensure that the systems continuously while new threats and vulnerabilities keep coming up with new developments in the IT sector. At the same time, our banks and regulated entities also keep preparing and making themselves more secure and more resilient. Brij Raj:
Thank you, Sir. I will request media persons to please ask only one question, as was informed earlier. I will request K. Ram Kumar from the Hindu Business Line to ask his question. Ram Kumar, please. K. Ram Kumar, The Hindu Business Line:
There has been divergence between credit and deposit growth, with credit growth outpacing the deposit growth actually by a huge number. So, just wanted to understand, will this not create a situation where, lending rates will go up, deposit rates will go up? And my second question is about whether the transmission is complete, monetary policy transmission? Sanjay Malhotra:
So, I will answer your second question. Monetary policy transmission is about 80 basis points, it has moderated. It was about 90 basis points on the lending side, and so, I would say, that it is more or less complete. Brij Raj:
Thank you, Sir. We will now take the remaining questions from the left side. I will request Falaknaaz Syed from Deccan Chronicle to ask her question. Falaknaaz, please. Falaknaaz Syed, Deccan Chronicle:
Sir, according to reports, Paytm Payments Bank had around ₹800 crores of funds that are locked. Of that, half of them are frozen… Sanjay Malhotra:
Specific entities, we don't answer the question. So, if you want to ask another question, you can do so. We don't get into specific - is it related to the specific entity, or you have a generic question related to… Falaknaaz Syed:
Generic, like how much of the deposits have been claimed, how much… Sanjay Malhotra:
No, so we don't get into specifics, specifics of any particular regulated entity. Falaknaaz Syed:
Okay. And there was the final guidelines (that) are likely to come out for mobile - in case of a default, the mobile phones can be locked by lenders. So, the draft guidelines were there. Now, what are the changes that are going to be made in the final guidelines, and when will those final guidelines be out? Will it be status quo wherein lenders will have the permission to lock phones remotely? Sanjay Malhotra:
We are still analyzing the guidelines, and quickly we should be in a position to finalize them. And I have not yet seen the comments that have come in. We had proposed, as you recall, allowing regulated entities to restrict in a phased manner, with sufficient safeguards, notice - advance notice being one of them, keeping their private data secure, not using it for any other purposes, etc. We will examine all the comments and quickly we will issue the revised guidelines. Brij Raj:
Thank you, Sir. I will request Krishn Kaushik from Financial Times to ask his question. Krishn, please. Krishn Kaushik, Financial Times:
Hi, good afternoon, Sir. So, back on FCNR (B), I just want to ask, the robust mobilization, in the past, these tend to be back-ended, and this time, it's been pretty good, $36 billion already. So, was it higher than what was expected when the policy was announced, and how much do you expect it to reach by the end of September? Sanjay Malhotra:
See, we do not have any target in mind. The flows, as I already mentioned, have been robust, and we continue to expect, going forward, further healthy inflows. We don't have a number in mind. Brij Raj:
Thank you, Sir. I will request Lalatendu Mishra from The Hindu to ask his question. Lalatendu, please. Lalatendu Mishra, The Hindu:
Good afternoon, Sir. The global shocks have become very frequent since the onset of COVID, and the West Asia conflict is not showing any signs of ending. Under these circumstances, what do you - what confidence you give to the people of the country, and what we should be all worried about? Thank you, Sir. Sanjay Malhotra:
I think the confidence comes from the way, Indian economy, all of us together, including the institutions, have met these challenges, whether it was COVID, whether it was the Ukraine war, or whether this present shock that we witnessed. We have come out - we have not only faced these challenges, but we have come out stronger. And even this particular episode or shock is being treated as an opportunity for us to further enhance our resilience. Our macroeconomic fundamentals, the other thing, they are very strong. Growth is resilient. Inflation is, although headline is going up, but underlying inflation pressures are muted, while we do see, it kind of aligning with the core inflation. Your banks, your corporates, your households, they have good, healthy balance sheets. Government continues to focus on reforms, continues on a path of fiscal consolidation. Our policy frameworks are robust, institutions are strong, so I think this is what gives us the confidence that, come what may, will emerge stronger from each episode. There's nothing to worry. Brij Raj:
Thank you, Sir. I will request Nachiket Kelkar from Business Today to ask his question. Nachiket, please. Nachiket Kelkar, Business Today:
Good afternoon, Governor. Just one question back to the circular that came on the fixed deposits and the uniformity of rates. What prompted that circular? Did you find instances where there was differential pricing that was being offered? Also, does that impact deposit mobilization because banks anyways have been struggling in terms of deposits, especially small finance banks? Will that not be a speed bump? Sanjay Malhotra:
On the deposits? Nachiket Kelkar:
Yes. Sanjay Malhotra:
See, there was a lack of clarity in certain aspects and so, primarily, we have standardized and clarified as to how the deposit rates should be offered in a transparent manner. There is no major change to the best of my knowledge, unless, you would like to highlight a few points where we have clarified. I mean, it's all about transparency. We have asked them that they should in advance, which was already there for some, and the banks were already doing it, but how to how to inform them in advance. So, we have said, you inform them through the website in advance about your deposits. Similarly, for bulk deposits, there was a non-standardization of the timing. So, we have said we have given them a leeway of till 10:00 AM for them for the bulk deposits. So, it's things like this. You want to add, Shirish? Shirish C. Murmu:
No, just I would like to add the intention only, because details are there in the circular. Basically, transparency and the level playing field, these are our main lookout. And we tried to achieve through these circulars. That's why we standardized the timing also. Brij Raj:
Thank you, Sirs. I will request Manish Suvarna from Press Trust of India to ask his question. Manish, please. Manish Suvarna, PTI:
Good afternoon, Governor Sir. I just need to understand, do you expect the government measures will be sufficient to protect the rural demand from the impact of the El Nino? And secondly, Sir, is the current growth story becoming more increasingly dependent on the urban consumption, as you mentioned that the private consumption has remained robust and there is a weakness in the rural demand? Sanjay Malhotra:
I think Indian economy, especially the agriculture sector, has demonstrated great resilience. The monsoon is still evolving, El Nino conditions have developed, but then there is the other opposite dipole that you have, that is also, that could perhaps counter some of the El Nino. It's still evolving, but it has been very resilient because of various measures, as you mentioned that the government has taken. Allied activities, they - we have seen if the agriculture is not doing well in a year, then allied sector is doing very well. The households are able to themselves, adjust their own activities to generate income and to offset some of the loss in income that we have seen. Irrigation has improved. Government has taken a number of measures. Madam [DG(PG)], you want to add something over here? Dr. Poonam Gupta:
I can add, and I would most more or less reiterate what just Sir said. Now, we have seen that the overall economy has become very resilient, and that resilience extends to different sectors, particularly the agriculture sector and the rural economy. And if you look at the data of the last, let's say, 15 years, you see that resilience play out in multiple ways. I'll just point out to a few. One is, as Sir said, there is an agriculture sector and there is an allied sector. Both the sectors have become very good, and they complement each other, particularly if we see agriculture not doing well in a year, then allied sector is doing very well. The other is if you look at some of the measures by the government, the share of area that is irrigated now is much larger, and it's a secular increase, which means though the rainfall deficiency and vagaries matter, they matter less than they used to in the past. If you look at the inputs that agriculture sector is using, whether through credit to the sector or farm mechanization, that has improved a great deal. The crop variety and seed variety has improved. So, all-in-all, all of these measures indicate towards a well doing rural economy and a very resilient agriculture sector. Brij Raj:
Thank you, Sir and thank you, Madam. I will request Saurabh Pandey from IANS to ask his question. Saurabh please. Saurabh Pandey, IANS:
Good afternoon, Governor Sir. As we have seen, you have got recent approval for polymer notes. So, what is the status on it, and by when we can see to come into existence, Sir? Sanjay Malhotra:
So, see, this polymer thing, basically has two purposes. One is that it enhances durability and the life, especially for the - this is relevant especially for your lower denomination notes where the velocity and, therefore, velocity is higher, and so, therefore, the lifespan is lower. These notes have been in circulation for more than 30 years in various countries, and one finds that the life is much more, 3x to 4x the life of the paper substrate. And then it also expands our capacity as our needs grow, that is the second purpose, that it expands our capacity as the needs of the economy increase. So, it's with these purposes that we have brought in. This is still a pilot. We will test, check as to how they perform in the Indian conditions, climate, and other infrastructure that we have put in place. And it's only thereafter that we will see if you need to further scale it up as it is or with changes. We are targeting that they are in circulation, if everything, goes as per plan, in the beginning of the next financial year. Brij Raj:
Thank you, Sir. I will request media persons again to please ask only one question. Moving on, I will request Akash Mandal from Indian Express to ask his question. Akash, please. Akash Mandal, Indian Express:
Good afternoon, Governor, DGs. I have a question related to the core inflation bit. You had said in your policy statement that core inflation excluding precious metals will align with core inflation by the end of the financial year. But you also mentioned that there are currently little signs of the generalization of price pressures so far. So, going ahead, what factors do you see potentially driving up the core inflation excluding precious metals in the coming few months from 2.5% currently to 4%, 4.3%? Sanjay Malhotra:
Yes, so it's because of a variety of reasons that core is going up, you know. I mean, it is, 2.1 to 2.5 kind of levels, is the core underlying inflation - core excluding pressure, and it's going up, right? So, not only core, but even the underlying pressure. So, whatever, benign inflation that we were in is, obviously, going forward, is not there. And so, we are watching out for that. And if there is any need to recalibrate policy rates because of that, then appropriate action will be taken. Brij Raj:
Thank you, Sir. Sir, we will now take the remaining questions from this side. I will request Mayur Shetty from The Times of India to ask his question. Mayur, please. Mayur Shetty, The Times of India:
Thank you, sir. Governor, my question was on the impact of the FCNR (B) collections on RBI's balance sheet. How do you plan to deal with the swap positions that RBI will be getting? Sanjay Malhotra:
See, we keep doing swaps, right? We do swaps. We do buy and sell foreign currency, and whatever are our reserves as a result of that, there is a Committee, there is a high-level Committee, there are members from the Government also which participate regularly in those meetings, and we take a call as to how we are going to manage the reserves. Basis three principles, I mentioned in one of the interviews, the first one is safety, the other one is liquidity, and the third one is returns. So, safety, liquidity, and returns. So, basis that but as I mentioned to you, this is not the liquidity that it will inject is there for a short while. The balance sheet is growing, you know, at a more or less, at a normal pace unless you have a flood of unexpected deposits, which we don't (expect). It is manageable. Brij Raj:
Thank you, Sir. I will now request Aaryan Khanna from Informist Media to ask his question. Aryan, please. Aaryan Khanna, Informist Media:
Thank you, sir. Good afternoon. Governor, just, following on the same train of thought in terms of liquidity. Now you've said that, you don't expect liquidity to stay in the system for too long, and that it'll be used up by the economy. Now, credit growth is already at 18%, it has risen from the last time that the MPC met. Is the RBI's intention now to increase demand or demand-pull inflation, is that because core inflation is lower than perhaps 4%? So, is it now the RBI's stance that you want to increase demand going into the festival months because liquidity will be used up by the economy? Sanjay Malhotra:
The present policy rate that we have - so, two things, let me say. One, the liquidity, we try to manage in a way that our operating target, which is the WACR, aligns with the policy repo rate. So, the kind of liquidity that we will give out will depend on what is the policy repo rate. And what the policy repo rate will be determined by the growth and the inflation dynamics where, your demand also comes in. So, if there is a slack, which there is, which we find with the growth being below potential, then obviously, to that extent, it will help demand. Brij Raj:
Thank you, Sir. I will now request Shyama Mishra from Doordarshan to ask her question. Shyama, please. Shyama Mishra, Doordarshan:
Hello, Sir. Sir, despite this elevated headline inflation, the stance has remained unchanged. What specific indicators or developments would prompt RBI to change or reconsider this stance? Sanjay Malhotra:
Obviously, it is the change, in the growth-inflation dynamics. If there is a very high inflation, which requires us to raise rates, or the other way round, if the growth is very less, inflation is - primary mandate is, of course, inflation. While I say this, I will keep in mind that the primary mandate is price stability and so, if inflation is going up beyond the target, not aligning with the target, persistently over a long period of time, which requires I would say, large rate cuts, then it will meet - and when you are sure that, you are going to raise or change rates in such a situation, is when, you go and change your policy. If you are uncertain or if you expect that the policy rates are not to be changed too much, then you may not change stance, as I have mentioned earlier, and you can still be data-dependent, and you can take a call to change rates. Shyama Mishra:
But Sir, it's already elevated, and we are seeing the projections also going forward is up. So, do we see a change in coming months? Sanjay Malhotra:
Let's see what is the change in the coming months. We will be data dependent. We will remain focused on our primary mandate, primary objective of maintaining price stability and meeting our target of 4% headline inflation over the medium term. And so, it'll depend on the inflation path. As we have said, we see that it is coming down, where it comes down to, how fast it comes down to, is what is important. And that is what, we've stated very clearly that we are looking especially at how inflation - inflation path, its composition, where it ends, is what, we are looking out in our resolution. And that will - and there's a lot of uncertainties, what we have said, and so we will take a call policy by policy and not give a guidance that we need to change stance, because we ourselves not sure as to what policy action this will entail. Brij Raj:
Thank you, Sir. I will request Kshipra Petkar from Financial Express to ask her question. Kshipra, please. Kshipra Petkar, Financial Express:
Good afternoon, Governor. There were reports that PSUs have sought for an extension on the swap window for ECBs. How is RBI viewing these requests, and do you think there's a need to extend the window? Thank you. Sanjay Malhotra:
There is neither a proposal to my mind, which is under examination, and neither is there a need, given the robust flows to extend the timeline as of now. Brij Raj:
Thank you, Sir. I will request Saurav Mukherjee from ANI to ask his question. Saurav, please. Saurav Mukherjee, ANI:
Thank you, sir, for giving me the opportunity. Sir, my question to you is, with the CAD projected at a manageable level alongside external risks like West Asia tensions and crude volatility, how confident is the RBI that capital inflows, specifically FDI and FPI, will provide sufficient structural support to offset these shocks? Thank you, Sir. Sanjay Malhotra:
As I said, macroeconomic fundamentals are very strong and so, therefore, we should continue to get good capital flows. FDI is certainly, more durable, more sticky and preferable. We got good, robust gross FDI numbers. Even net FDI is positive. Number of things, the government is doing. One is the number of agreements that have been signed on the trade agreement part, but even that helps, indirectly that helps investment, that will help. Going forward, government is focused on ease of doing business, that will help. It has opened up or expanded the scope of various sectors for FDI, for example, insurance. So, that should help. We have also taken a number of measures. We are now trying to simplify the rules, regulations governing FDI. A draft is, you are aware, is under public consultation. We will streamline those. I think the fundamentals of our economy are very strong. Even if you look at not only the capital side, even on the current account side. This year, for the first two months that we have data, despite the conflict, we have a CAD surplus, which is much more than, in the first two months. I don't have the figures, but if you look at the difference between the first two months last year and this year, current account we are better, and that's, of course, because exports have done better, imports have come down. A lot of imports have come down. Going forward, we expect our external position to be very good, excellent. And the measures that we have taken, I think, will also help the expectations channel through because of which the Rupee has acted more. FPI also is, more of expectations. The FPI flows which have been volatile is again not because of any underlying reason, but because of valuations, relative valuations. But as mentioned even in my statement, the results of Q1 show a very good performance of the manufacturing and other corporate sector. Brij Raj:
Thank you, Sir. I will request Jeevan Bhawasar from Akashvani to ask his question. Jeevan, please. Jeevan Bhawasar, Akashvani:
Namaskar, Sir. You just mentioned that plastic notes might come into the market by the beginning of the next financial year. So, currently, what are the testing conditions, where has testing started or will take place, and what will be its features? We would like to know this. Sanjay Malhotra:
We will inform you about that at the right time. Currently, we have issued a tender for the substrate. That substrate, the polymer paper on which this note will be printed, will arrive, after which testing will take place, security clearance will be conducted. There are several stages and many security features. At the right time, we will inform you and the general public about its security features. Brij Raj:
Thank you, Sir. I will request Soumyajit Saha from Nikkei to ask his question. Soumyajit, please. Soumyajit Saha, Nikkei:
Thank you, Governor. Last year, between September and December, we saw India's exports to the US drop less than a percent, even though we were facing the harshest tariffs in all of Asia. Now, we have the sanctioning Russia bill that is being considered by the US Congress, there is a risk of up to 100% tariffs on India and China. Given the mild - relatively milder impact of US tariffs last year on economic growth, I wanted to understand, one, how relevant are US tariffs to your estimation of economic growth now? And two, has that estimation decreased given your experience, given your recent experience, in case the bill gets passed into an act? Sanjay Malhotra:
As of now, we have given our projections basis the current tariffs that are there. Going forward, we really don't know as to how whether they'll be higher, they'll be lower. There's also a trade agreement which is happening, then there is this bill which may get passed, and we will consider. I mean, it's still evolving. It will depend on which particular sectors, what kind of rates, etc., who our competitors are. It will depend on so many things. So, right now, we don't have enough data to do any kind of an analysis on such a thing. But you are right that whether it is us or whether it is others, the impact of tariffs is not as much, because there is, some rerouting that happens. Even if you look at even the US trade data, the effective tariff rates are much lower than if you would just to look at the tariffs, because there are so many exemptions - sector exemptions, country exemptions, and so obviously, the impact may not be as high as the headline numbers or the tariffs may suggest. Manojit Saha, Business Standard:
RBI has not yet come out with the upper (layer NBFC) list. Has RBI decided not to publish the upper (layer NBFC) list any longer? Sanjay Malhotra:
It is now, I think, it is now principle-based. So, as per those principles, everyone knows what is the list, and so that is where the matter stands, right? Shirish C. Murmu:
Yes, I think list will be out very soon, but as you know we have changed the rules. So, do you need the list? Sanjay Malhotra:
That's the point, because anyone, which has more than a particular asset size - it's simple now. You don't actually need (to ask) anyone. So, everyone knows as to which NBFC is in the upper layer, which is in middle, which is in base layer. Piyush Shukla, NDTV Profit:
People are just thinking about the one which has applied for deregistration. Sanjay Malhotra:
That continues to be in, all those which meets the criteria, they continue. Piyush Shukla:
So, Tata Sons will remain in the list? Sanjay Malhotra:
Will remain, it is in the list. Piyush Shukla:
In the new list which will come out? Sanjay Malhotra:
New list, as mentioned, that it is principle-based, and that will continue. Let's not ask specific questions, relating to a specific entity. The status is what it was earlier. Ekta Suri:
Sir, my question was that for banks, showing glorified numbers has become such a big reason, margins have become such a big concern that someone takes short-term deposits just before announcing results so that CASA looks good, someone gives extra money to the same client on bulk deposits in the name of marketing expense, or someone, in the rush of ECL where provisioning has to be done more, is quickly taking bad loans out of the books. So, has this become a major concern in the banking sector considering people's choice for investment or other things is increasing and people don't want to keep that much money in the bank? So, taking all these concerns together, banks are dressing up their books in different ways. What would RBI say on this, Sir? Sanjay Malhotra:
No, I don't think that this - what you are calling window-dressing - first of all, no one benefits from window-dressing. If any bank or regulated entity does this, today all stakeholders, customers, everyone understands very well that from this type of window-dressing, neither profitability increases, nor is there any material impact on their balance sheet. So, all customers and stakeholders understand this very well. So, they get no benefit from this. I don't think this window-dressing is happening in very large amounts or that we are concerned about this. Our directives in this regard are very clear, and our supervisory role - supervisors, they also go time to time and look at the books and accounts of banks. And if they find any such occasion or instance, they give instructions to correct it. This is not a special concern for us. Ekta Suri:
But Sir, when it happens around results, if someone wants to buy shares, they feel the results are very glorified. So, Sir, does this concern increase around results? Sanjay Malhotra:
Our supervisory team goes and looks at all these things. If anyone is doing this repeatedly, or at any such occasion as you are saying when their results are coming out, it is looked into. And few - not many, few regulated entities that are deviant in this manner. I will request DG Mr. Swaminathan to also answer. Swaminathan J:
Well, just to supplement to what you have said, Sir. I think you listed so many concerns, but I can assure you that the facts are not as bad as you wanted to list it out. It is not. I can tell you the system is robust, as Governor earlier mentioned, and we have - on the one side, stakeholders who are well aware, and it is not easy for anyone to live longer with that kind of projected or a picture which is not reflective of the true and fair position of the underlying conditions. So, I don't think that that it is something which can give you a long-term solution. The second is that we have - we do have supervision which is strong enough, as Governor mentioned, that if there are any outlier behavior displayed by any entity, we deal with them bilaterally, not through media, but we will deal with them bilaterally. So, be rest assured that, as covered in the MPC statement as well, the banking system as well as the NBFC sector is quite resilient despite the kind of volatility that we have been witnessing in the economic conditions. But we will continue to keep watching the data points that emerge from every single regulated entity, both through on-site and off-site means, and then deal with it if there are any instance of non-compliance. But at the system level, be rest assured that things are adequately well-managed. Mayur Shetty:
The SC has issued an order requiring RBI to come out with an SOP for dealing with mule accounts. Any comments? Swaminathan J:
Yes, there was a suo-moto case of, I am sure that you all would have seen that yesterday, the order was passed, and a draft SOP has already been prepared and submitted to the Supreme Court. So, now we will fine-tune that in terms of the four weeks time that has been given to RBI. So, we will fine-tune in the light of the observations by the Supreme Court, and we will soon issue. And from both from the number of frauds that are getting reported, and also with the grievance redressal module, money restoration modules getting activated, on the one side, there are significant efforts that are being made to prevent frauds from occurring. On the other side, consumer awareness is being significantly stepped up by both by us as well as the regulated entities. On the third aspect, wherever people have fallen victim, both the law enforcement and the regulated entities will take whatever best possible effort to see that their money is restored as much as feasible. Brij Raj:
Thank you, Sir. Sanjay Malhotra:
DG Rohit, you have anything to add? If there is anything which I have left out or anything which pertains to you which you would like to supplement? Rohit Jain:
So, normally in the Monetary Policy, there's a question on CBDC and Unified Lending Interface, and many of you have been asking about the progress under that. So, I just want to tell that we are making good progress. The adoption is increasing. They are not pilots, they are actually in the ground being used. And we are following up with banks for increasing the use cases, CBDC and ULI both, and we are engaging with various state governments for increased adoption of ULI. So, in the times ahead, we expect a lot more usage and popularity of both CBDC and ULI. Manojit Saha:
One clarification, which is if the pilot CBDC was over? Rohit Jain:
No, no, it was never a pilot. It is actually happening. CBDC is actually being used for actual transactions. It is only for name's sake that it's a pilot. Jaspreet Kalra, Thomson Reuters:
I'm sorry if I could clarify on that, sir, but is the CBDC is no longer a pilot, is what you're saying? It's in full launch? Rohit Jain:
No, no, it's already being used for actual transactions. So, you cannot call it a pilot that way, but because we are still testing out the technology and the various adoption means, it is being called a pilot. Hamsini Karthik, Moneycontrol:
What is the scope of usaging? Rohit Jain:
There are various use cases, both for cross-border and for specific government schemes, directed uses, and transfers to particular segments, all of that is being expanded, which will lead to increased adoption and usage. Ekta Suri:
And Sir for ULI, have the records been digitized like state-wise also, so that the penetration of the same increases? Rohit Jain:
So, 12 States have digitized their land records so far. Other States are also doing that work. And a lot of interest is being shown by different State Governments to use the CBDC and the ULI for different schemes. And we are in constant dialogue with them to increase their usage. Brij Raj:
Thank you, Sir. With this, I would like to thank the Governor, Deputy Governors, and the media for their participation in press conference and wish you all a good day. |