From note exchange to US Treasury yields, what RBI Governor said

On Rs 2,000 notes

“Thereafter (post October 7) it (Rs 2,000 notes) can be exchanged or deposited at the 19 RBI Issue Offices, which are there in every state capital. In case you are away from state headquarters and cannot travel, there is a facility of sending Rs 2000 notes through the postal department to the RBI (Issue Offices). The (exchange or deposit) process is now with banks till tomorrow (October 7) and thereafter it will be with the RBI Issue Offices.

We have so far got back Rs 3.43 lakh crore and only about Rs 12,000 crore are left. Of the amount we got back, 87 per cent has come as bank deposits and the rest is exchanged to other denomination notes. Bulk of Rs 2,000 notes have come back and so it has largely met our original objective of withdrawal of Rs 2000 notes.”

(RBI Deputy Governor T Rabi Sankar said some portion of Rs 2000 notes will be stuck in legal cases and enforcement agencies and so that will take its own course. “To the extent that a large part of Rs 2,000 notes has already come back and as we have given time even after October 7 for withdrawal through the RBI Issue Offices, we expect most of it will be withdrawn,” he said.)

On repo rate cut

“(We want to) align inflation to the 4 per cent target. If there is a sudden spike or a fall, we have to see how durable that decline is. Only when inflation is at 4 per cent or below 4 per cent on a durable basis, that may call for a rethink. But not at the moment.

On impact of rise in US Treasury yields

“Our domestic bond yields are really reacting to international factors like bond yields going up in some advanced economies. Our bond yields are determined primarily by domestic factors as it stands today. The bond yields going up elsewhere especially in the US do normally lead to currency depreciation in the emerging market economies but the difference in the context of India is that our forex reserves are sizable and very comfortable. So this gives a lot of confidence to the market. Secondly, we do intervene in the market to maintain stability of the currency and to prevent excessive volatility. So primarily, if I can put it differently, we use one stone to kill one bird. Of course to kill a bird is not the right thing to say in the context of animal safety. We use one instrument for one target or for one objective. When you use an instrument, it may have some collateral impact elsewhere.”

On state of financial health of government

“It is not for me to really comment on that but let me say that the government has a fiscal consolidation path which they announced in the budget. There was fiscal expansion because of the Covid time requirement but the overall expansion that India did under the fiscal was very calibrated and targeted. After the pandemic, the government has announced the fiscal consolidation road map and by and large they are sticking to that. So far as the current year deficit is concerned, statements have been made by the finance ministry that the government will stick to the fiscal deficit and they are targeting the fiscal consolidation road map. As far as central government finances are concerned, I don’t see any major problem or anything that worries the central bank.”

On fall in remittances

“Remittances are remaining quite robust and steady. Temporarily, it (decline) may happen but our data shows they are holding comparable to last year.”

On inclusion of African Union on G20

“Inclusion of the African Union into G20 is a very welcome development. It goes in line with India’s objective of placing the voice of Global South on the global table. G20 is a multilateral forum and you cannot have a situation where a whole continent is left out, except South Africa which is the southernmost tip of the African continent. Now the financial sector issues and other issues relating to Africa will be discussed in G20.”