Despite the recent spike in inflation, the Reserve Bank of India continues to be focussed on growth, said RBI Governor Shaktikanta Das.
Retail inflation jumped to 7.59 per cent in January, the highest print in 68 months, largely due to rising vegetable prices. “With this temporary spike in inflation, we have not shifted our attention from growth. We are still focussed on growth. Because of the spike in inflation, we have decided to take a pause,” Das said in an interview Monday with The Indian Express.
Asserting that the central bank has the space for independence and autonomy, Das said all decisions taken in the last year “are our own objective, independent decisions”.
He said the government’s concern on any issue that impacts the economy has to be considered by the central bank but also pointed to several legislative and non-legislative proposals in the July 2019 and February 2020 budgets where issues concerning the RBI have been addressed by the government.
“These include the amendment of the RBI Act to give additional powers to RBI with regard to regulation of NBFCs and housing finance companies (HFCs) being brought under the purview of RBI, and the amendment to the Banking Regulation Act to accord more powers to the RBI on regulation of the urban cooperative banks (UCBs),” he said.
Das said RBI was “closely and intensively” monitoring the top 50 NBFCs, which account for roughly 75 per cent of the total portfolio, and that the central bank will endeavour “to ensure that no large systemically important NBFC collapses”. “We are very mindful of the aspect of financial stability in the case of banks too. RBI will always ensure that stability of the banking sector is maintained,” he said.
On criticism pertaining to the regulatory easing in specific sectors like SMEs and real estate — recognition of bad loans — which some observers described as RBI turning the clock back on cleaning up the financial sector mess, Das said these did not qualify as an “across the board forbearance.” And that interventions were “specific and targeted” and “subject to certain guidelines and parameters”.
On the RBI’s new measures to ease credit flow like Long Term Repo Operations and the CRR waiver for loans for auto and real estate, Das said these “innovations” were in response to “the evolving dynamic situation.”