- RBI governor Shaktikanta Das’s maiden monetary policy resulted in a change in the central bank’s stance and also delivered a rate cut. Additionally, he indicated that an interim dividend is on the cards. Excerpts:
Is there scope for more rate cuts in future?
The shift in stance of monetary policy from calibrated tightening to neutral also provides flexibility and the room to address the challenges to sustain growth of Indian economy over the coming months. The monetary policy committee (MPC) decision in this regard will be data-driven in keeping with its primary objective of price stability and growth. MPC decisions will be data-driven — there will be no scope for discretion.
Has the fiscal slippage been factored into monetary policy decisions?
The impact of various budget proposals and other developments have been factored into our projections. We discussed the possibility of fiscal slippage. We have analysed the transmission time that each of the announcements would take to have an impact on the ground level, the expenditure measures announced by the government, and we have also analysed on the revenue side. We have analysed how GST is playing out, what is the future outlook with regard to the GST collections, which we expect will pick up because the initial bottlenecks have been removed and procedures streamlined.
What are the risk factors before the Indian economy?
The biggest is the monsoon. The second one is the crude oil prices and the overall external situation. There are issues around Brexit — how it is playing out and how the US economy is recovering. There are trade conflicts, which are expected to get resolved but we do not know how much time it will take.
How are you addressing the issue of dilution of promoter holding in private banks?
There are two cases. In one of the cases, some action has already been taken. The other case is under litigation. It’s in the court. So, therefore, I would not like to make any observation in public.
RBI’s view on the Justice B N Srikrishna report indicting Chanda Kochhar…
There are two aspects to this: The RBI looks at the regulatory aspects — whenever there is a regulatory violation by the bank or an individual from the bank, the RBI will act. But if there are certain things that require investigation, it is within the domain of investigating agencies. There, it is for the investigating agencies to take further action.
The government has asked for interim dividend and is also asking for surplus from previous years. What do you think of the government practice of using RBI funds to bridge fiscal deficit?
The interim dividend will be announced as and when the central board takes a decision. The payment of surplus or dividend from the RBI is part of the RBI Act. We are not doing anything beyond the legal provision. Now, how the government uses the proceeds is the government’s decision. Any decision of the RBI is always driven by certain principles and certain accounting norms.
Will the RBI relax the February 12 circular on recognising bad loans?
At the moment, there is no proposal to modify the circular.
via It is up to agencies to probe Chanda Kochhar: RBI governor – The Economic Times