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Tag: Shaktikanta Das

  • Shaktikanta Das: Inflation dangers from rise in world commodity costs

    The renewed surge in worldwide crude oil costs would require shut monitoring as they pose a threat to home inflation, mentioned the Reserve Bank of India Governor Shaktikanta Das as per the minutes of the assembly of the Monetary Policy Committee (MPC) launched on Thursday.
    “We need to remain watchful of the risks to domestic inflation arising from rise in international commodity prices due to exogenous factors including geo-political developments,” Das mentioned within the MPC assembly held on February 10. The panel stored the important thing coverage charges unchanged within the evaluate.

    Das mentioned excessive commodity costs and provide facet shortages might weigh on company profitability amid weak pricing energy and unfavourable base results throughout 2022-23. “The global financial market volatility associated with monetary policy normalisation process in the advanced economies could further complicate the situation,” Das mentioned.

    MPC mentioned the outlook for crude oil costs is rendered unsure by geopolitical developments whilst provide situations are anticipated to show extra beneficial throughout 2022. MPC has set an inflation goal of 4.5 per cent for fiscal 2022-23.

    According to MPC minutes, world monetary market volatility, elevated worldwide commodity costs, particularly crude oil, and persevering with world supply-side disruptions pose draw back dangers to the outlook. “The potential pick-up of input costs is a contingent risk, especially if international crude oil prices remain elevated,” MPC mentioned.

    “Global risks include high oil prices, rising inflation and interest rates in major countries and possible volatility in foreign capital outflows,” MPC Member Ashima Goyal mentioned.

    According to MPC Member Mridul Okay. Saggar, Indian crude oil basket is up practically 25% within the earlier two months. The present geopolitical stress in Europe is a major threat and if it interprets into oil and gasoline costs spiking, we might want to modify macro-economic insurance policies suitably.

  • RBI: Inflation to be decrease at 4.5% in FY23, rising oil costs pose ‘risks’

    Despite crude oil costs rising over $90 per barrel, the Reserve Bank of India (RBI) has projected decrease retail inflation stage of 4.5 per cent within the subsequent fiscal, 2022-23, as in opposition to the inflation forecast of 5.3 per cent for 2021-22.
    “The CPI (consumer price) inflation trajectory has moved in close alignment with our projections. In particular, the softening of food prices is providing welcome relief,” RBI Governor Shaktikanta Das mentioned whereas unveiling the financial coverage. The bettering prospects for foodgrain manufacturing and the anticipated easing of vegetable costs on contemporary winter crop arrivals are including additional optimism, he mentioned. The RBI’s coverage goal is to focus on a CPI inflation of 4 per cent inside a band of plus or minus 2 per cent.
    Moreover, the softening of pulses and edible oil costs is more likely to proceed in response to robust provide facet interventions by the Government and improve in home manufacturing, it mentioned. “The hardening of crude oil prices, however, presents a major upside risk to the inflation outlook,” Das mentioned.

    The coverage panel mentioned core inflation stays elevated at tolerance testing ranges, though the persevering with go by of tax cuts regarding petrol and diesel final November 4 would assist to average enter price pressures to some extent. The transmission of enter price pressures to promoting costs stays muted in view of the persevering with slack in demand.
    Further, as dangers from Omicron wane and provide chain pressures average, there may very well be some softening of core inflation. On stability, the inflation projection for 2021-22 is retained at 5.3 per cent, with This autumn at 5.7 per cent on account of unfavourable base results that ease subsequently, the RBI mentioned.

    “RBI projections on inflation for FY22 is retained at 5.3 per cent and all quarter-wise projections on inflation for FY23 are within the comfort zone of central bank. This gives comfort to the market as well as public,” mentioned Indian Banks’ Association Chairman A Ok Goel.

    The CPI studying for January is predicted to maneuver nearer to the higher tolerance band, largely on account of hostile base results. Taking all these elements into consideration and on the belief of a traditional monsoon, CPI inflation for 2022-23 is projected at 4.5 per cent with Q1:2022-23 at 4.9 per cent; Q2 at 5 per cent; Q3 at 4 per cent; and This autumn at 4.2 per cent, with dangers broadly balanced. “… the RBI indicates a glide path for inflation going down to the 4% handle in Q3 and Q4 FY23,” mentioned Indranil Pan, chief economist, Yes Bank.

  • RBI purple flags indicators of stress in MSMEs, dangerous loans prone to rise

    The Reserve Bank of India (RBI) has warned of an increase in dangerous loans in 2022 and rising indicators of stress in micro, small and medium enterprises (MSMEs) and the microfinance section, which name for shut monitoring of those portfolios.
    Macro stress exams for credit score danger point out that the gross non-performing asset (GNPA) ratio of banks could enhance from 6.9 per cent in September 2021 to eight.1 per cent by September 2022 underneath the baseline situation and to 9.5 per cent underneath a extreme stress situation, in response to the Financial Stability Report (FSR) of the RBI.
    NPAs to advances ratio declined from 8.2 per cent at end-March 2020 to 7.3 per cent at end-March 2021, and additional to six.9 per cent at end-September 2021.
    However, the report mentioned banks are financially wholesome and robust. “Balance sheets of banks remain strong and capital and liquidity buffers are being bolstered to mitigate future shocks,” RBI Governor Shaktikanta Das mentioned within the report. “While the pandemic induced bouts of volatility, spillovers and heightened uncertainty are challenging, the Indian financial system has stood up well and remains well prepared to meet the funding requirements of the economy,” Das mentioned.
    The FSR mentioned MSME portfolio of PSU banks and personal banks signifies accumulation in NPA and SMA-2 classes in September 2021 relative to March 2021. NPA stage was 18.5 per cent as of September 2021, as towards 16.8 per cent in March 2021.

    DefinedSlowdown in credit scoreCredit to the micro, small and medium enterprise section slowed down(y-o-y) by the tip of September vis-a-vis March. The decline was notably noticeable within the sub Rs 25 crore ticket measurement throughout main financial institution teams.

    Credit to the MSME section slowed down (y-o-y) by the tip of September 2021 vis-a-vis March 2021. The decline was notably noticeable within the sub Rs 25 crore ticket measurement throughout main financial institution teams. Under the Emergency Credit Line Guarantee Scheme (ECLGS), loans amounting to Rs 2.82 lakh crore have been sanctioned until November 12, 2021, of which Rs 2.28 lakh crore was disbursed (Rs 1.94 lakh crore by SCBs, forming 20.6 per cent of the incremental credit score through the interval), it mentioned.
    The report mentioned the worldwide financial restoration has been shedding momentum within the second half of 2021 within the face of resurfacing Covid circumstances, the brand new variant Omicron, provide disruptions, elevated inflationary ranges and shifts in financial coverage stances and actions throughout economies.

    The report says, “But with the second supplementary demand of grants worth Rs 3.73 lakh crore, presented in December, the budgeted fiscal deficit of 6.8 per cent of GDP may come under strain?”
    The capital to risk-weighted property ratio (CRAR) of banks rose to a brand new peak of 16.6 per cent and their provisioning protection ratio (PCR) stood at 68.1 per cent in September 2021.
    Slowdown in credit score
    Credit to the micro, small and medium enterprise section slowed down(y-o-y) by the tip of September vis-a-vis March. The decline was notably noticeable within the sub Rs 25 crore ticket measurement throughout main financial institution teams.

  • ‘Recovery turning broad-based, warrants continued support’

    The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Wednesday saved the coverage fee unchanged for the ninth time in a row and retained its accommodative stance to assist the restoration within the economic system which is but to totally attain the pre-pandemic ranges.
    All members of the MPC voted to maintain the repo fee – the important thing coverage fee of RBI or the speed at which it lends to banks – unchanged at 4 per cent whereas one member, Jayanth Varma, dissented towards retaining the accommodative coverage stance.
    The persevering with liberal financial stance of the central financial institution and receding fears over Omicron boosted the inventory markets with the BSE Sensex rallying by 1,016 factors, or 1.76 per cent, to 58,649.68 and the Nifty rising 293 factors at 17,469.75.

    “Given the slack in the economy and the ongoing catching-up of activity, especially of private consumption, which is still below its pre-pandemic levels, continued policy support is warranted for a durable and broad-based recovery,” RBI Governor Shaktikanta Das mentioned in a press release. The central financial institution additionally retained the reverse repo fee – the speed at which the RBI borrows from banks – at 3.35 per cent, indicating that it’s not but prepared for the normalisation of the accommodative coverage.
    “Against this backdrop, the MPC decided to retain the prevailing repo rate at 4 per cent and continue with the accommodative stance,” Das mentioned. Downside dangers to the outlook have risen with the emergence of Omicron and renewed surges of COVID-19 infections in quite a lot of nations, he mentioned.

    The central financial institution has retained its actual gross home product (GDP) progress projection for FY22 at 9.5 per cent, the identical as two months in the past.
    The MPC additionally appears to have gotten some cushion from inflation projections. The RBI has projected shopper worth (CPI) inflation at 5.3 per cent for FY2021-22 and 5 per cent for the primary half of the subsequent monetary 12 months. CPI inflation was beneath 5 per cent in each September and October 2021.
    The MPC famous that the restoration in home financial exercise was turning more and more broad-based. Rural demand is predicted to stay resilient whereas the spurt in contact-intensive actions and pent-up demand will proceed to bolster city demand, it mentioned. That mentioned, exercise is “just about catching up with pre-pandemic levels and will have to be assiduously nurtured by conducive policy settings till it takes root and becomes self-sustaining,” the MPC decision mentioned.
    “Downside risks remain significant rendering the outlook highly uncertain, especially on account of global spill overs, the potential resurgence in COVID-19 infections with new mutations, persisting shortages and bottlenecks and the widening divergences in policy actions and stances across the world as inflationary pressures persist,” the decision added.
    Moreover, as Das mentioned, the recurrence of COVID-19 waves in lots of elements of the world together with the looks of the Omicron variant, cussed inflation and headwinds from persevering with provide bottlenecks solid a shadow on the outlook. The MPC decision additionally highlighted the significance of normalising excise responsibility and worth added tax together with different measures to handle enter price pressures to make sure a sustained decreasing of core inflation.
    Summing up the method, Das mentioned that “managing a durable, strong and inclusive recovery is our mission”.
    The central financial institution additionally introduced measures to cut back the surplus liquidity within the banking system. It elevated the sum of money it can soak up via so-called variable fee reverse repos to Rs 7.5 lakh crore by the tip of December.

    Separately, the RBI has additionally proposed to launch a Unified Payments Interface (UPI) based mostly cost product for characteristic telephone customers. It can be contemplating enabling small worth transactions via an “On-device” pockets in UPI apps which can preserve banks’ system assets, with none change within the transaction expertise for the consumer.
    Bankers mentioned the RBI coverage was on the anticipated traces. “As expected, the benchmark rates were kept unchanged with accommodative stance. The economic outlook sounded more optimistic as the major indicators such as agriculture and allied activities, spending on travel and tourism, GST receipts and air passenger traffic indicated a more robust and broad-based recovery. The persistently high core inflation, however, remained a key figure determining the path of policy,” mentioned S. S. Mallikarjuna Rao, MD & CEO, Punjab National Bank.

  • Crypto forex: RBI chief asserts warning, ‘not enough debate’

    THREE DAYS after a Prime Minister-chaired assembly arrived at a consensus that future steps by the federal government within the subject of crypto forex will likely be “progressive and forward-looking”, Reserve Bank of India Governor Shaktikanta Das as soon as once more strongly urged warning and voiced severe considerations.
    “I would only like to say that when the RBI as the central bank of the country, which is entrusted with the responsibility of maintaining financial stability, after due internal deliberation says that there are serious concerns on macro-economic and financial stability, there are deeper issues… I’m yet to see serious, well-informed discussion in the public space on these issues,” Das mentioned on the SBI Banking Conclave Tuesday.
    This isn’t the primary time the RBI has struck a cautionary word.

    At a Business Standard occasion final week, Das had mentioned, “Cryptocurrencies are a serious concern to RBI from a macroeconomic and financial stability standpoint. The government is actively looking at the issue and will decide on it. But as the central banker, we have serious concerns about it, and we have flagged it many times.”

    ExplainedOfficials waryWorld over, regulators are attempting to meet up with the quickly increasing crypto forex market. In India, each monetary sector regulators, RBI and SEBI, are cautious given the rise within the quantity and worth of transactions, and its doable influence on financial, monetary stability.

    On Tuesday, the RBI Governor mentioned 80 per cent of the crypto accounts are small accounts of Rs 1,000 and Rs 2,000 and there are even accounts of Rs 500. “Yes, the value of transactions and trading has gone up, but the number of accounts as I said is exaggerated. And I stick to that,” he mentioned.
    On Monday, trade executives informed the Parliamentary Standing Committee on Finance there have been round 15 million lively subscribers on their exchanges in India, with the entire excellent worth pegged at round $6 billion, sources mentioned. A current commercial by the Internet and Mobile Association of India and crypto exchanges, had claimed, “Crores of Indians have invested over Rs 600,000 crore in crypto assets.”
    In the PM-chaired assembly on Saturday, there was acknowledgement that this was an evolving expertise, and the federal government would hold a detailed watch and take proactive steps. Further, authorities sources mentioned, for the reason that points reduce throughout particular person international locations’ borders, it was felt that it might additionally require world partnerships and collective methods.

    On the expertise half, Das mentioned the blockchain expertise is 10 years previous and may develop with out cryptocurrencies too. “The discussions are that, you know, it’s a new technology we should capitalise on it, and I have said it earlier this technology is more than 10 years old, the blockchain technology is nothing new… The technology can grow and will grow without cryptocurrencies or whatever name you use to describe cryptocurrencies,” he mentioned.
    Amid indications the federal government will introduce a Bill on cryptocurrencies within the winter session of Parliament, the Standing Committee on Finance had referred to as crypto forex associations and trade specialists on Monday to debate the “opportunities and challenges” on this subject.

    “There were a lot of issues discussed around cryptocurrencies. Everyone (from industry) gave their views. Now we have to wait for the government. The government is going to bring a Bill to Parliament in this Winter session. Once that Bill is referred to the Standing Committee, then we get an idea what it states, and how the Bill will take care of it,” a supply who didn’t want to be named mentioned.

  • Numerous indicators recommend financial restoration is now taking maintain: Shaktikanta Das

    The Reserve Bank of India (RBI) Governor Shaktikanta Das on Tuesday stated that there are quite a few indicators that recommend that financial restoration is now taking maintain, however for the expansion to be sustainable and attain its potential, funding in personal capital has to renew.
    Speaking on the SBI Banking & Economics Conclave 2021, the RBI governor stated that India has the potential to develop at a fairly excessive tempo within the post-pandemic situation if the personal capital funding resumes.
    “India’s remarkable progress on vaccines is a shining example of scientific capabilities,” the RBI governor stated. He added that contact-intensive companies nonetheless must get misplaced momentum.

    Das stated that the Q1 GDP information revealed a major hole in personal consumption and funding. He stated that there’s a want for sustained impetus in order that development can exceed pre-pandemic developments.

    Even as many economists have revised down their development forecasts between 8.5 and 10 per cent for the continuing monetary 12 months, the RBI didn’t change its forecast of 9.5 per cent for the fiscal thus far.
    Speaking on the occasion, Das stated that India has emerged as a high performer within the startup panorama.
    Speaking on the banking sector, he urged the banks to be investment-ready when the funding cycle picks up,, which the RBI thinks is prone to start from the following monetary 12 months.
    It might be famous that since 2013, personal capital has been lacking from the economic system and lots of are of the view that this could start from mid-next fiscal.
    Das additional added that the gross NPA of banks additional improved in September compared to the June stage. He strongly urged the banks to enhance their capital administration course of.
    He lauded the tech entrepreneurs and stated that India has emerged as a high performer within the startup panorama, attracting billions of overseas capital.
    On being requested about cryptocurrency, Das stated that when the RBI after due inside deliberations says there are issues on macroeconomic and monetary stability from cryptocurrency, there’s a want for deeper discussions.
    The authorities is prone to introduce a invoice on cryptocurrencies in the course of the winter session of Parliament starting November 29, amid issues over such currencies being allegedly used for luring buyers with deceptive claims and for funding terror actions.
    At current, there are not any explicit rules or ban on the usage of cryptocurrencies within the nation.

    On Saturday, Prime Minister Narendra Modi had held a gathering on cryptocurrencies with senior officers and indications are that sturdy regulatory steps could possibly be taken to take care of the problem.
    -with PTI inputs

  • RBI Retail Direct Scheme: India is opening its $1.1 trillion bond market to retail patrons

    India is about to open up its sovereign bond market to particular person patrons on Friday because it seeks to widen the investor base to fund the federal government’s large borrowing program.
    Prime Minister Narendra Modi will launch the so-called ‘RBI Retail Direct Scheme’ for buyers on Friday, the Reserve Bank of India mentioned in a media invite. Retail buyers can open and keep their authorities securities account with the RBI freed from price, it mentioned.
    RBI Governor Shaktikanta Das had first flagged this initiative in a February coverage overview whereas calling it a “major structural reform”. In July, the central financial institution mentioned buyers can have entry to bidding in major auctions in addition to the central financial institution’s buying and selling platform for presidency securities referred to as Negotiated Dealing System-Order Matching Segment, or NDS-OM.
    The transfer comes at a time when rising inflation provides stress on the RBI to elevate charges. Tighter financial coverage is prone to weaken the demand for bonds, making it difficult for the federal government to execute its near-record borrowing program. Other emerging-market nations in Asia just like the Philippines have additionally sought to lift funds from residents to battle the pandemic.
    “Given low rates on bank fixed deposits and perception of low risk on government bonds, retail investors may be inclined to venture into direct investing in gilts,” mentioned Pankaj Pathak, fund supervisor at Quantum Asset Management Co. “However, investors should be cautious of the market risk associated with long-term gilts.”
    Yields on India’s benchmark 10-year authorities bonds have risen prior to now 5 months amid surging crude costs. They’ve eased in November after New Delhi reduce tax on retail fuels. A report on Friday is anticipated to indicate shopper inflation accelerated to 4.40% in October from 4.35% within the earlier month, based on a Bloomberg survey.

  • PCA framework revised: Asset high quality, capital, leverage key

    The Reserve Bank on Tuesday introduced a revised Prompt Corrective Action (PCA) framework for banks to allow supervisory intervention at an “appropriate time” and in addition act as a software for efficient market self-discipline. The new provisions can be efficient from January 1, 2022, an RBI notification mentioned. The revised framework excludes return on belongings as a parameter which can set off motion underneath the framework.
    Payments banks and small finance banks (SFBs) have additionally been faraway from the record of lenders the place immediate corrective motion may be initiated. Capital, asset high quality and leverage would be the key areas for monitoring within the revised framework, the RBI mentioned.
    “Indicators to be tracked for capital, asset quality and leverage would be CRAR/ common equity tier I ratio, net NPA ratio and tier I leverage ratio, respectively,” as per the revised framework. In governance associated actions, the RBI can supersede the board underneath Section 36ACA of the BR Act, 1949.
    The breach of any threat threshold might end in invocation of the PCA. The framework will apply to all banks working in India, together with overseas banks working by way of branches or subsidiaries based mostly on breach of threat thresholds of recognized indicators. “A bank will generally be placed under PCA framework based on the audited annual financial results and the ongoing supervisory assessment made by the RBI,” it mentioned, including, “The RBI may impose PCA on any bank during the course of a year (including migration from one threshold to another) in case the circumstances so warrant.”

  • Govt extends tenure of RBI governor for 3 years until Dec 2024

    The authorities Friday prolonged the tenure of RBI Governor Shaktikanta Das for 3 years until December 2024. The re-appointment might be efficient from December 10 or till additional orders, whichever is earlier.
    “The Appointments Committee of the Cabinet has approved the reappointment of Shaktikanta Das as Reserve Bank of India Governor for a period of three years beyond 10.12.2021 or until further orders, whichever is earlier,” learn an official assertion.
    Das had served as former secretary of Department of Economic Affairs from 2015 to 2017.
    Das, a 1980-batch Tamil Nadu cadre IAS officer, was entrusted with the duty of overseeing the re-monetisation of the economic system after the shock resolution to withdraw 86 per cent of the foreign money in circulation in November 2016.
    After his retirement, he was named India’s G-20 sherpa and likewise appointed as a member of the fifteenth Finance Commission.
    Das, a historical past graduate from the celebrated St. Stephen’s College in Delhi, was dropped at the Finance Ministry quickly after the BJP-led NDA authorities got here to energy in mid-2014 and given cost of the essential income division.

  • Asks auditors to verify associated celebration transactions: RBI Governor flags ‘camouflaged’ transactions, fund diversions

    With a number of cases of fund diversion and switch of income to “connected parties” surfacing, Reserve Bank of India (RBI) Governor Shaktikanta Das on Monday requested auditors to determine and totally scrutinise associated or linked celebration transactions to make sure that there isn’t a undue switch of revenue or belongings.
    “Of late, several instances of related party transactions without following ‘arms-length’ principle and established transfer pricing mechanism have been observed,” he stated.
    “There have been instances of diversion of funds and/or transfer of profits to connected parties through various means – intra-group loans on favourable terms, over or under invoicing of transactions, asset transfers without fair valuation, etc,” Das stated whereas addressing the National Academy of Audit and Accounts, Shimla.

    “Auditors need to identify and thoroughly scrutinise related or connected party transactions to ensure that there is no undue transfer of income or assets,” he stated. Three main monetary entities – IL&FS, DHFL and Srei corporations – had come beneath supervisory motion within the final three years as a result of fund diversion and mismanagement.
    “We have also seen cases of manipulation and misstatement of true nature of financial statements by employing opaque technological means (IT black boxes),” Das stated. Real transactions are camouflaged beneath numerous layers of IT options by a couple of entities. As such, auditors must be technologically savvy and be capable of ‘see-through’ the layers of knowledge know-how to detect the actual nature of hidden transactions, the Governor stated.
    “Such undesirable practices and structures should draw the attention of the auditors. Since RBI, as the supervisor of the financial system, relies and leverages on the work done by auditors, the audit professionals are being sensitised through various fora to improve the quality of their reporting,”
    Das stated. “We are constantly engaged with individual auditors, audit firms and the Institute of Chartered Accountants of India (ICAI) to improve the quality and depth of audit. A lot of work has been done in this area, but lot more needs to be done,” he stated.

    He stated inaccurate info could result in sub-optimal selections or extra useful resource allocation, which might be neither in public curiosity the place a public authority is concerned nor within the curiosity of particular person stakeholders.
    He stated statutory auditors play a significant position in sustaining market confidence on audited monetary statements. “In banking industry, this public role is particularly relevant for financial stability, given that banks hold public deposits.”