CEOInterviews.AIRBI Policy Decision LIVE | RBI Addresses The Media Post Monetary Policy | Shaktikanta Das

S

Shaktikanta Das0:00

It's been uploaded. Also, as a part of initial remarks, I would like to make nine points. First, domestic economic activity continues to be strong. We expect the real GDP to grow by 7% in the next financial year, 24-25. Second point, CPI inflation is moderating with intermittent interruptions and spikes. We have to remain vigilant about the incoming data and the outlook. Our endeavor to achieve 4% inflation on a durable basis has to continue. Third, globally, markets are front-running central banks in anticipation of policy pivots, but central banks remain apprehensive and await a more durable alignment of inflation with the targets. Four, liquidity will be actively managed by the Reserve Bank. Five, our multipronged, proactive, and calibrated policies have worked well to maintain and strengthen macroeconomic and financial stability. Six, systemic, sectoral, and institution-specific signs of stress are being proactively monitored and acted upon wherever necessary. Seven, let me reiterate that good governance, robust risk management, sound compliance culture, and protection of customers' interest are the hallmarks of the Reserve Bank's approach to the safety and stability of the financial system and individual financial institutions. Regulated entities must accord the highest priority to these aspects. This is the seventh point. The eighth point is the external sector of the economy remains resilient. The current account deficit is expected to be eminently manageable. Nine, the exchange rate of the Indian rupee has remained stable. Thank you.

Y

Yogesh2:36

Thank you, sir, for those opening remarks. And may I request all of you to wait for your turn to be called and request also to stick to one question. And if we have time, we'll go for the other or second or third question. So I'll begin by inviting L. Venkatesh from CNBC TV18.

L

L. Venkatesh2:58

Thank you, Governor. Thank you, Yogesh. Well, sir, I'm a little confused. I mean, confusion about whether you are distinguishing between liquidity and your stance. You have mentioned in three places that the entire rate hike has not been fully transmitted. So I assume you want more hike transmitted. But separately, you have said that you will manage liquidity, para 21, in great detail, that you will manage liquidity with a bunch of instruments. Should we understand, therefore, that unlike the majority of the last five months when call was closer to 6.75, you will be more like you were in the last one week, where you will give long-term liquidity through VRR repo and adjust for short-term, which is keep call rate closer to 6.5? Is that what you are trying to say? That I'll do that, but I want more interest rate hikes to happen. And sir, since you have dwelt twice on this good governance, I must add, are you trying to say that you will not give Paytm any further timeline to set them right? Does FB 29 stand? Is that what... there are two questions actually.

Y

Yogesh4:15

Two questions, so please ask one question each. The first part of the question, I would request Deputy Governor Michael Patra to reply. The second part, I would request Deputy Governor Swaminathan to reply. Go ahead.

M

Michael Patra4:28

As Governor has clarified in his statement, the stance is all about the future course of policy rates. Liquidity is endogenous to the rate. When the rate is the chief instrument of monetary policy, liquidity follows the rate. You have to move liquidity to achieve a certain rate. So our objective is to keep the repo rate, keep the weighted average call rate around the repo rate. But there are times when there are temporary drivers of autonomous liquidity, like government balances, which go through tectonic shifts, and market participants take time to adjust. Even they are unsure about the future direction of this. So that is why sometimes the call rate goes to where it went. But you saw that we were nimble in our actions and we brought it down to the repo rate. That is our endeavor.

L

L. Venkatesh5:22

You were nimble after five months. So I'm asking, will you be like the previous five months? Will you be like the pre-last...

M

Michael Patra5:30

No, that is not correct. Because at the time when the rates were up, we allowed market participants to take what liquidity they wanted from us through outstanding facilities, and we did the main operation every 14th day. So it was not that we let it go, but it was the market participant is still... you saw the reactions of the VRR, they are unwilling to let go because they are unsure about how balances will move.

S

Swaminathan6:01

See, as you know, as a matter of policy, we don't comment on individual entity or actions that we initiate in such cases. But anyway, since this question is on the uppermost of mind of most of you, I think I would like to say two-three things essentially to set the context. While we don't want to be discussing the individual details here because that will not be proper, in terms of context, as you all know, that this is a supervisory action on a regulated entity for a persistent non-compliance. Second, such supervisory actions are invariably preceded by months and at times years of bilateral engagement where we don't... not only pointing out the deficiencies but also provide more than adequate time for them to take corrective action. Third, of course, is in terms of, as a regulator, it's incumbent upon us to protect the interest of the ultimate consumer and thereby protecting the stability of the financial system. So these actions have to be seen in that particular context. Coming to the second part of your question, what lies ahead, you know, as part of MPC, we don't give a forecast in these matters. So I think you will have to wait. And of course, we have been... what feedback we have been getting, we'll work on, and as a responsible regulator, suitable steps will be taken to ensure that the customer inconvenience, if any, is minimized. So we will take care. I think with that, we can give a rest to this question and then move on to MPC is my request. Thank you.

Y

Yogesh7:39

Thank you, sir. I'll move on to Mr. Gaurang Rangan from Economic Times.

G

Gaurang Rangan7:43

Thank you, sir. Good afternoon, Governor. For the rate decision, rather, I would say the status quo, you specifically mentioned that the transmission of 250 basis points is still continuing. So the bankers say that the deposit rates have already gone up by 250 basis points and the lending rates have also gone up. So what in your mind is the actual transmission that has not happened, and how much is that? And what is the benchmark that you're looking at to conclude that the transmission has happened? Thank you.

S

Shaktikanta Das8:16

Okay, again, you know, like the previous questions, I would request, I think, DJ Swaminathan supplemented by DJ Michael Patra to reply to that question. Let there be wider participation. I don't want to monopolize all the answers. So, yeah, go ahead.

S

Swaminathan8:32

Yeah, see, as far as the transmission in a hiking phase, as we have always seen in the past, the rates on deposit side, the resets much faster and they get passed on. And as we have seen, repo rates have almost played out. While on the lending side, it does take time to pass for two critical reasons in our assessment. There are two major reasons. One is that the proportion of loans that are benchmarked externally, what we call EBLR-linked loans, is still less than 50%. So where the transmission could be instant is only where the EBLR comes into play. In case of other instruments, other benchmarks like MCLR or base rates or fixed-rate loans, it does take time to transmit. So that is the precise reason why we still see that transmission is fully not in place. The second, also in a hiking phase, we have seen banks in their anxiety to maintain their market share in the incremental credit also adjust their margins so as not to lose their market share in the incremental credit. So that also impedes a complete transmission in terms of the effective interest rate. So I hope, as we understood from the context of these two parameters. Thank you.

M

Michael Patra9:54

Anything you would like to supplement? No.

Y

Yogesh9:57

Yeah, I'll move on to Mr. Anun Mishra from ET Now.

A

Anun Mishra10:05

I would like to ask a question once again on the Paytm issue. We understand there has been a meeting with PM officials and Bank of India, and what transpired in that? I know I don't want to know the exact details, but from the financial system point of view, the company has been claiming that they have taken all the remedial measures and all the efforts are being made so that there is minimal or no impact of customers. So from that point of view, is there any remedial measure which has been suggested by Reserve Bank of India?

S

Swaminathan10:42

I think this is again a matter of bilateral discussion, so I don't think that'll be proper for us to discuss it in this forum. So as I said, discussing on individual entities will not be very proper, giving granular details in this matter. So we are seized of the issue, and as we take steps, we will keep the media and public certainly informed. Thank you.

S

Shaktikanta Das11:07

You see, as the Deputy Governor has already commented, I mean, sufficient... I'm again saying in a general sense, not specific to this case, we give sufficient time. You know, we give sufficient time to every regulated entity, every entity that is supervised by the Reserve Bank to comply with the requirements, the regulatory requirements. We give sufficient time, and sometimes, as he pointed out, sometimes it may even look more than sufficient time. And we would not like to act, you know, we are a responsible regulator, we are a responsible supervisor. If everything had been complied... I'm talking about in a general sense, why should we act? I mean, after all, we have a responsibility. We are... it's a responsible institution, RBI. So that's how it is.

Y

Yogesh12:02

Yeah, thank you, sir. Allia Radio.

A

Allia Radio12:51

Existing customers... custom... thank you, sir. Anari Business Today. Good afternoon, sir. I'll also make an attempt on Paytm. You know, DJ Swaminathan talked about this persistent non-compliance, and he also said in such cases, months and years of bilateral engagement. You know, my question is, why did RBI not consider appointing a director on the board of Paytm when you knew about this persistent non-compliance issues?

S

Swaminathan13:26

See, as a regulator, we have various tools in the kitty, and it's not necessary that every single tool will be deployed in every single situation. We make our own assessment to the scale and proportion of the issue as well as the tool that we will have to use at different points in time. So one-size-fits-all kind of solution may not work in such situations. So I would like to stop there rather than trying to elaborate on that. We may use certain tools, may not use certain tools, but it is after a due consideration that we do. Thank you.

Y

Yogesh14:03

Thank you, sir. I'll move on to Mr. Anil Roy from Bloomberg.

A

Anil Roy14:06

Thank you, sir. Sir, the budget was non-inflationary and the government really brought down the fiscal deficit, etc., and the bonds have fallen. So the government probably wants interest rates to come down, but RBI probably is keeping interest rates high. You're saying the transmission is not complete, etc. Is there a lack of coordination, sir?

S

Shaktikanta Das14:29

No, I mean, has the government said anywhere that they want the interest rates to be brought down? So therefore, it's a very speculative proposition. So I cannot reply to that question. Thank you.

Y

Yogesh14:41

Thank you, sir. I'll invite Shama Mishra from Dainik Bhaskar.

S

Shama Mishra14:47

Good afternoon, sir. So it's again on Paytm. The situation, as we describe it, that Paytm is known as one of the pioneers of fintech coming to this situation. Do you see this as a worrisome situation for the entire sector? And what lesson would you like to highlight for any similar future companies?

S

Shaktikanta Das15:10

Now, let me sort of provide some broad guidance on this Paytm issue, because there have been at least four or five questions till now, and there could be more, many more questions. So let me put the entire thing, you know, let me put the records straight. Now, you said that worry about the system and all that. There is no worry about the system at the moment. Here we are talking about a specific institution, a specific payment bank. As the Deputy Governor Swaminathan has already explained, he has provided several details. Similarly, I also don't want to comment on a specific case, but in this context, I would like to make some general observations, not with specific reference to Paytm as such, but some general observations which includes all our regulated entities. So all our regulated entities, does not exclude Paytm, it is applicable to all the regulated entities. And in fact, this... which one camera? Camera focus on... no, no, no. The advice is the camera should not focus on this because I have written so many things, these are private parts. So the cameras can focus perhaps on my face. So, but let me... thank you. I think that's very agile on his part. So let me focus on some... make some general points, and I would like to make about six or seven points. First is that over the last few years, as all of you are aware, we have significantly deepened our supervisory systems, approach, and methods. Number two, our emphasis is always on, as the Deputy Governor has pointed out, our emphasis is always on bilateral engagement with the regulated entity. And in that engagement, we give focus on, and we are completely focused on nudging the regulated entity to take corrective action. Let me rephrase it. Our emphasis, for you to make note, our emphasis is always on bilateral engagement with the regulated entities with focus on nudging them for corrective action, and sufficient time is given for undertaking such corrective action. The third point, when such constructive engagement which we undertake, when that does not work, so when such constructive engagement does not work, or when the regulated entity does not take effective action, we go for imposing supervisory or business restrictions. Number four, such restrictions which we impose are always proportionate to the gravity of the situation. Please take note that such restrictions are proportionate to the gravity of the situation. Number five, all our actions, being a responsible regulator, being a responsible supervisor, all our actions are in the best interest of systemic stability and protection of depositors' or customers' interest. These aspects cannot be compromised. Individual entities should be mindful of these aspects for their long-term success. Number six, over the last few days, we have received a lot of queries, clarifications from various quarters, including members of the public. You have raised a few questions today. So we have noted all these questions and clarifications which have been sought from us, and based on that, we will be issuing a FAQ sometime next week. So that should address all these questions and clarifications which are being raised by you and which have been raised in the public domain and raised bilaterally with us from various quarters. Number seven, finally and emphatically, let me stress and let me emphatically state that the Reserve Bank is and will continue to encourage and support innovation and technology in the financial sector. Let there not be any doubt about Reserve Bank's commitment to promote fintech, to promote innovation, to promote technology in the financial system. Thank you.

Y

Yogesh20:30

Thank you, sir. I will move on to Mr. D.H. Krishan from Moneycontrol.

D

D.H. Krishan20:33

Thank you, Governor. I have a very short related question, sir. You know, in your remarks, you stressed about the good governance and sound compliance, and this is not something that you're speaking for the first time. You have been emphasizing this part, and the role of the boards in the regulated entities is extremely critical, as you have pointed out. What is your view on the role of the Paytm board? Because, you know, it didn't happen all of a sudden. Since 2021, RBI has been alerting the regulatory breaches, and as per the process, the RBI on-site inspection report is passed to the ACB and the board for corrective actions. So probably, you know, if they had acted on time, things would not have worsened to this level. So have you... why is the regulator silent on the role of the board while the reasons for this action is quite evident?

S

Swaminathan21:29

See, typically, we do not share such granular information. We have been engaged with the institution, with the entity, for quite some time. And within that, with whom we interacted and how it was, you know, such granular details, it will not be appropriate on our part to share those details.

Y

Yogesh21:53

Thank you, sir. I'll move on to Mr. Vishnath from NDTV Profit.

V

Vishnath21:55

Hi, sir. Thank you so much, Yogesh. I'll give a little respite and move to another topic. But on CBDCs, you're talking about introducing additional programmability...

S

Shaktikanta Das22:07

No, we don't need any respite. The topic of... go ahead. But the point is, you know, the same question is coming up, and also in as much as we are issuing a FAQ, so I would request if you have still some clarification or something on which you want clarity, I think you can send it bilaterally to us directly. You can mail it to us. We will see to what extent we can address that question.

V

Vishnath22:33

Yeah, sure. My question is with regard to the additional programmability that you're proposing to bring in with respect to the CBDC pilot. The question has been there since the beginning when this topic was... DJ Rishankar had introduced. Doesn't this go against the fungibility of money? If the intent is to make CBDC the equivalent of paper currency, and if you introduce specific restrictions on usage, does the fungibility factor not go opposite to that?

S

Shaktikanta Das23:00

No, we are not imposing a restriction. I think we are making it more flexible. But let DJ Rishankar take that question.

R

Rishankar23:10

Thank you. You know, shifting to me. So, I'll give a more formal answer, I think, but the best way to think about it is when a family puts some currency notes in a package to be used for, let's say, groceries during the month, doesn't mean that the fungibility of the currency is lost. It's just that until that spending happens, it can be used for no other purpose. I'm just giving you as an example to be able to think on what we mean by fungibility, what we mean by programmability. When you do programmability, for a moment, fungibility is on hold. We have to realize that it's a facility that we are providing. The currency, again by way of an example, let's suppose that a school has given some money to a student who won a prize to buy books in a particular shop. So the student can only use this money to buy books in that shop. That's intended. Supposing the student goes and buys that book, he cannot use it for any other purpose. As soon as the book is purchased and the currency goes to the bookshop owner, it again becomes fungible. So it's only for that period that fungibility is limited. Supposing he doesn't spend it, goes back to the school, fungibility is restored. So it is a way of controlling expenditure that you do not get unless it's digital and that you do not get unless it's a token. It's a facility that is there. We'll use it, and the facility will typically be agreed by both the recipient as well as the person who puts that condition. So no, to give a very short answer, it doesn't militate against the programmability, doesn't militate against fungibility. It's only a specific use binding.

S

Shaktikanta Das25:06

Thank you. And to extend that reply further, imagine a situation where, later on, when CBDC is fully implemented at a later date, if the government wants to give some cash support to certain individuals for a specific purpose, programmability will be useful in such situations. So that the money, the cash which is going from government to such persons can be used for specified, specific purposes. So therefore, it's typical for every household in the beginning of the month to do their own budget and set aside money, you know, one envelope for school fees, one envelope for electricity bills, and it happens. It's a common thing which happens in a large number of households.

Y

Yogesh26:02

Yeah, next. Thank you, sir. I will request Manojit Saha from Business Standard to ask a question.

M

Manojit Saha26:06

Thank you, sir. So I again go back to para 21 on liquidity. So you said stance is with respect to rates and incomplete transmission. Does that mean that you're creating elbow room to do liquidity operations, OMO purchase to infuse liquidity? Because March is going to be very tight, and then such liquidity operation will not be seen out of sync with the stance. So you're separating the stance from liquidity management, and you're saying it is only on rates. Does that give you elbow room to do purchase when liquidity will be very tight in March?

S

Shaktikanta Das26:48

You see, what we have attempted to do today is to clarify and clearly state that do not read the stance of monetary policy in terms of excess liquidity prevailing or deficit liquidity prevailing. That's not the point. Liquidity plays a secondary role to support monetary policy transmission. That is, there is a monetary policy, there is a repo rate, liquidity situation in the market. I think that is what the Deputy Governor said in the beginning itself. You clarified that we try to keep the liquidity at a level wherein the overnight call rate, which is the operating target of monetary policy, remains around the repo rate. In the first part of this year, due to various exogenous factors, there was a lot of liquidity. So we conducted variable rate repo auctions, but market took time to adjust. And market also... banks, individual banks make their own analysis of the liquidity situation, and that analysis by the banks also varies within a day. You look at yesterday, or was it day before, we did two VRR auctions. The response to the first one was very low, I think some 4,000 crores. But then we, same day, we did one more, and we got a response of 27,000 crores. So between morning auction when the banks offered 4,000 crores and to a subsequent auction in the afternoon, the banks offered 27,000 crores. So therefore, due to various autonomous factors, liquidity situation has been fluctuating in the market. Banks make their own assessments. Banks also take their own decisions. Markets and banks, meaning the banks and the markets, take time to adjust to the evolving liquidity situation. So far as the RBI is concerned, we will remain active, we will remain nimble in our liquidity management. What instruments we will utilize, that will depend on the prevailing situation, which will come up from time to time. I cannot say that we will use this and not use this. We have several instruments at our disposal. Depending on situation, we will use the most appropriate instrument. Also, let me ask one thing very straight. Other people also, so I'll move on to Mr. Brajesh Kumar from Zee Business News.

B

Brajesh Kumar29:56

Hidden cost loan... hidden... hidden... specified... charges... I mean, experience... terms and conditions... digital lending... already... simple fact... statement... one and all inclusive interest rate... interest rate... to, you know, let us be very clear, the bank's terms and conditions are very transparent in the sense that all information is given. But experience term sheet statement purely in customers' interest, and I'm sure banks will encourage it because the banks also are interested. The banks are long-term players, so they are not short-term operators. No second question. Important terms and conditions to give greater transparency.

Y

Yogesh33:19

Thank you, Danad sir. P. Shukla from Financial Express. Good afternoon, Governor sir, DGs, Yogesh. Sir, just taking you back to where we started. DJ said that there are various tools in kitty with regard to Paytm. How the future course of action will be taken? Sir, very specifically, banks are becoming very hesitant to actually partner with this bank, Paytm Payments Bank, for shifting their customers and their merchants in one go. They are saying that we need regulatory approval for that. So will you provide that, and will you allow the sale of their wallet to other potential payments banks?

S

Swaminathan34:05

See, it will be very difficult to provide any hypothetical answers at this point in time. So as I said, there's still time that is provided for customers to continue to access the services that is provided. So during this period, we will see what else needs to be done. And keeping, as Governor also said, we keep the customer in the center of what needs to be done. So we will take appropriate steps. The second part of your question, in terms of what the other banks will have to do, each of them, it's a business decision. They have got to carry out the required due diligence as per their laid-down board-approved policies, and I'm sure that they will carry out that if they have got to do a partnership. So that's something which we will not comment at this point in time. But what tool and shape it will take is not something which we would like to speculate at this point in time. We may wait for the FAQs, which will give you more clarity.

P

P. Shukla35:00

Sorry, so banks don't need regulatory approval for taking on board the Paytm customers? It's very specific to a particular item.

S

Swaminathan35:07

I think it's better for you to wait for the FAQ. Please be patient. Let the FAQ come next week.

Y

Yogesh35:16

Okay, thank you, sir. I'll move on to Siti Bat from Reuters.

S

Siti Bat35:19

Thank you, sir. Governor, today you've said that next year's growth is projected at 7%. Nominal GDP growth, as per the budget, is projected at 10.5%. I mean, I don't know if my maths is wrong, but effectively that would mean inflation is at around 3.5% next year. Is that right? Are you being a bit too optimistic about growth, or is the government underplaying growth and being very modest in their projections? Thank you.

S

Shaktikanta Das35:41

So I think you take that question.

M

Michael Patra35:46

Yeah, because he likes to play these balls. No, I will not venture to answer for the government, but my understanding of this is that what goes into the nominal GDP is not CPI inflation, it's the GDP deflator. And GDP deflator is always a weighted combination of CPI and WPI. Now the WPI has been in deflation for most part of this year, and it's just emerging out of deflation. So that must be the reason.

Y

Yogesh36:14

Thank you, sir. I'll move on to Mr. Mayur Shetty from Times of India.

M

Mayur Shetty36:20

Governor, in the development measures, you spoke about reviewing the AEPS, and some banks have come out with warnings on how fingerprints can be cloned using silicon. Is that what's caused this thing? And also, since OTP is also being reviewed, does it mean that the traditional forms of KYC are the best option for regulated entities?

S

Shaktikanta Das36:49

No, OTP is not being reviewed. What I'm saying is that over the years, it so happens that OTP has become the most popular and commonly used AFA, you know, that additional factor of authentication. But with the movement of time, various other technologies and methods have come up. So we want to just tell the players in the field that there are other methods also, and RBI will be agnostic to them as long as they are sound methods. The banks and institutions are free to adopt them. But I think let DJ Rishankar take the other part of the question with regard to the Aadhaar AEPS.

R

Rishankar37:36

Yeah, you sort of gave the answer in your question itself. It's basically to ensure that since this is being used in rural and such areas a lot, it's important that the safety of these transactions is ensured. Now, with the passage of time, as in the case of additional factor of authentication, we can use various technologies to do it. So that is essentially the position here. All touchpoint operators will go through a standardized, safe, and secure onboarding process. We can add other factors into it. For example, the switch-on has to be done by the customer instead of it being pre-available on the system, or it can have geo-limits beyond which it cannot operate. Whatever is required for the customers, the idea is that as Reserve Bank has always been placing a lot of emphasis on the security of digital transactions, which we believe is key to ensuring customer adoption, especially customers who are not savvy digitally. But this is an effort in that direction to improve the security of transactions.

Y

Yogesh38:52

Thank you, sir. I'll move on to Mr. Hesh Yas from Indian Express.

H

Hesh Yas38:57

Hi, sir. Good afternoon, sir. There is an expectation that the stance would be changed to neutral. Sir, what are the preconditions for stance to become neutral?

S

Shaktikanta Das39:10

I cannot give a forward guidance on that. I think when such a thing happens, we will explain how it is. But you see, I'll tell you, the evolving situation continues to be very volatile and uncertain. You look at the commentaries coming out from the central banks, mostly of advanced countries. Sometimes they appear to be giving a forward guidance in one particular direction. Sometimes the market interprets the next guidance to be in a different direction. So therefore, at the moment, we are not giving any forward guidance with regard to stance or rate. When we will... you know, market is... there's a talk of when the central banks world over will cut rates. And as I have said, markets are overshooting, running ahead of the central banks. So I think preconditions, I will not be able to specify, unless R. Michael Patra wants to comment anything on that. So because these are very volatile times, and so therefore it's better to wait. And when something like that happens, we will explain it appropriately.

Y

Yogesh40:33

Thank you, sir. I'll move on to Miss Gopika Gupta Kumar from The Mint.

G

Gopika Gupta Kumar40:38

Thank you, Yogesh. Good afternoon, Governor. Considering that your inflation forecast for next year is at 4.5% and GDP at 7%, and you're saying that RBI needs to be vigilant in the last mile of disinflation, does it rule out a rate cut in FY25? And secondly, on the Paytm issue, what is the larger issue? Is it the KYC, or is it something related to the ownership or interlinkage between a regulated and a non-regulated entity? Because if it is KYC, then does RBI need to relook at the minimum regulations around the minimum KYC accounts? That is my second question.

S

Shaktikanta Das41:17

No, you know, again, an entity-specific details we would not like to spell out. And let me leave it at that because I cannot really share. It's a bilateral engagement between the RBI and the regulated entity. The regulations are there in their place. The regulations are robust. There is no need for... it is not a case where there was a regulatory deficiency or there was a regulatory correction required. It's an issue of compliance. Compliance with various parameters. You mentioned about KYC, but compliance with so many aspects. Again, let me not specify the details. So regulations are there, regulations are robust, and it's a question of... it's a situation where we are focused on the compliance not being there with the regulatory requirements.

G

Gopika Gupta Kumar42:20

Thank you, sir. The first question, sorry, first question on the rate hike and the pause.

S

Shaktikanta Das42:26

I cannot say that. I think only time will tell. Only time will tell, you know, when something like that will happen. So thank you, sir. Last few questions, we will take.

Y

Yogesh42:38

Shesh, Namaste, sir.

S

Shesh42:43

Namaste, sir. Sir, loan... merger... explanation... financial banking sector, overall financial system, finance... competition... performance, overall parameters, system level or individual level parameters are strong. India's financial system, growth... sound. As a supervisor, supervised entity, bank, NBFC, financial institution... directly... specifically, interest, customer interest, depositors' interest, overall financial system, financial stability or financial system. Thank you, sir.

Y

Yogesh46:15

Priya from Informous Media, and then Anika from Hindu Business Line. Two questions, last two questions.

P

Priya46:24

Good afternoon, Governor. So, public debt has been high for three years now because of COVID spending by governments across the world. So what risks does RBI see specifically now to raise this as a risk factor, and what are the spillover risks for this for India?

S

Shaktikanta Das46:44

You see, I was raising it in a global context, not in the context of India. The India part of the information I have given just by way of information, but my reply was in the global context. You see the footnotes of my monetary policy statement, all the supporting data is given. By the end of this decade, global debt-to-GDP of advanced economies, all put together, is expected to exceed 100%. Today's date and in future, very surprisingly, you will notice that the debt-to-GDP of the advanced economies are actually much higher than the debt-to-GDP levels of the emerging market economies. Fiscal deficit, advanced economies... money, you know, what you call as creating new money, printing notes. So therefore, these are kind of things. You know, the debt has to be sustainable for the long-term stability of the global financial system. So therefore, I have raised this as an issue which can become a future source of stress to the global financial system. So far as India is concerned, you please again look at my statement. I provide the data in the footnote. The IMF Fiscal Monitor gives out the data for India. The debt-to-GDP for India had gone up to 88%, general government, states and center, had gone up to 88% during the COVID year of 2020 because of the various fiscal measures which were undertaken. And it projects how by 2028, it's likely to... it has already come around about 81% or so. By 2028, according to the IMF Fiscal Monitor, it is expected to be around 80% or so. So that is the path which I just mentioned by way of information.

Y

Yogesh49:10

Thank you, sir. Anika, last, last.

A

Anika49:15

Hi, sir. Good afternoon. Sir, this is not about Paytm but about UPI. Basically, there were talks about restricting, capping the market share of each app in terms of the UPI transaction volume share. We've seen the deadline was extended, and the market share has only gone up for these platforms. Now that we're seeing the Paytm migration happen to some of these platforms like Google Pay and PhonePe, their market share is only increasing. Is there a concern regarding over-reliance on a few specific platforms, and does that raise the risk of them becoming too big? And could the RBI then look at a structure of systemically important PA entities or something like that? And because I'm the last person, just one small clarification. You mentioned the overnight two VRRs in the day, two VRRs. Is there a specific amount or range that the RBI has in mind that you would prefer that banks not park their funds beyond that in SDF?

S

Shaktikanta Das50:10

I think DJ Rishankar followed by DJ Michael Patra. Two questions, but you said last person, so the last mile in the queue should always have priority. So last person. So I think DJ Rishankar followed by Michael Patra.

R

Rishankar50:25

Yes, since it's the last question, I'll keep it very short. The limit is from the point of view of diffusion of risk, in case some entity doesn't become available for whatever reason at any point in time. But to take it to too big to fail is probably not appropriate here because they are just third-party app providers. The limit of 30% funds don't go through them, so the system is not threatened, except that there could be a temporary inconvenience in terms of shifting over to an additional system. Having said that, it'll be for the market to decide. The market forces have to play out such that this percentage is more evenly decided. We will not be interfering in the market process to ensure that the 30% or something is... in any case, it's an NPCI requirement. We'll have more players to come in. Hopefully, with technology, we will get some more players, and that percentage can be maintained. We have time till the end of this year anyway.

M

Michael Patra51:34

Yeah, we don't have any preconceived limit on how much they put in SDF. The SDF, by its very nature, is a standing facility, and it's at the discretion of market participants as to how much they want to use. As to why we did two VRR during the day, we assess market condition and bidding behavior. And in the first auction, we realized that there were bids which were higher than the amount we offered. We offered 50, we got a lot more. So we thought that probably they would like to park more in the VRR, which is more remunerative than the SDF, and so we did the second.

S

Swaminathan52:17

Yeah, I think DJ Swaminathan wants to just... just one clarification on, because the question came around the apps. See, this particular action is against the payments bank. It's not to do with, not to be confused with the payment app, which is done right. That's okay, we will clarify through the FAQs. But just to clarify, in terms of your question, just as supplemental information, that as an app is not impacted by this action.

Y

Yogesh52:47

Okay, thank you. Thank you, sir. With this, we come to a formal close of the press conference. The first... okay, okay. As expected, the press conference was dominated by questions around Paytm. And while the Governor refrained from commenting on any specific entity, he said this message is for all regulated entities, and that does not exclude Paytm Payments Bank. His message, summarized in seven points, was very clear: that there's always bilateral engagements with players when there are deficiencies found. All of these players are always given sufficient, if not more than sufficient, time to rectify these regulatory deficiencies. If even after these engagements no action is taken by the regulated entity to fix the situation, it is at that point that the Reserve Bank of India chooses to act, either by placing business restrictions or an embargo, whatever the case may be. Here, they always said the regulator is a responsible entity, and the proportion of restrictions is always, or rather the gravity of the restrictions is always proportionate with the gravity of deficiencies that have been observed, without stating what the concerns are. Also, very importantly, RBI says because there's been various clarifications and questions raised in the public regarding Paytm, the Reserve Bank of India is going to issue an FAQ next week to clarify some of those doubts. Also, he's also said let there not be any confusion in the market or any question about the fact that the Reserve Bank of India is supportive of innovation in the fintech space and will continue to do so. He also at another point highlighted that KYC was not the only concern when it comes to this particular entity; there were several other concerns, without highlighting what those were. So plenty of cues given by the Reserve Bank of India Governor and the Deputy Governors on Paytm about the gravity of the situation, not indicating whatsoever if they will ease up. As far as the policy itself is concerned, not much said about the liquidity. The stance remains that they will be active, they will be nimble with liquidity management. So we'll have to see how that plays out. For now, we have to take a very short break, but don't go anywhere. We're back with more on the policy coverage in just a bit.

H

Host1:00:26

All right, welcome back to our special coverage. We continue to cover the RBI policy and some of the important comments coming in from the RBI Governor on the Paytm issue. And to discuss all of that, we have an esteemed panel of guests standing by. We have T.V. Mohandas Pai, the chairman of Aarin Capital, who is joining in now. We'll also have market expert Prakash Diwan with us. On the policy side, we also have Soumya Kanti Ghosh from State Bank of India, Pranav Vandre of HSBC, Ashish Vaidya of DBS Bank India, and N.J. Gambhir of Axis Bank. Gentlemen, preliminary, all of you, thank you for joining in. Let me first start with the issue of Paytm. And Mr. Mohandas Pai, you heard the Governor talk about the fact that these actions have been taken on Paytm Payments Bank on account of severe regulatory lapses, but that is not to say that the RBI is against innovation, against the fintech ecosystem. Your first thoughts on what you made of the matter and the comments coming in from the Governor.

T

T.V. Mohandas Pai1:01:21

No, no, I agree with the Governor's comment because I heard him very clearly. He said our policy is to give regulated entities adequate time to comply, and the RBI has given Paytm 22 months, from whatever we know. And over 22 months, there have been multiple audits, multiple visits, multiple reports, including by third-party audits. And in case the Paytm is not able to comply despite all this and despite repeated warnings, they should face regulatory action. So RBI has been fair. RBI has given them adequate time. 22 months is a long time. Don't forget they asked Razorpay to stop onboarding new customers. They asked HDFC Bank to stop onboarding new customers. So RBI has been extremely consistent, and they've given adequate time to Paytm. And what I am shocked about is what are the independent directors of a listed company like Paytm doing, twiddling their thumbs? They should have been very careful. They should have formed a committee of independent directors, taken it independently, spoken to the regulator, and make sure the company complies. They have let down their shareholders. They have not complied because whenever there's a regulatory action by a regulator in any country, when there are very large compliance issues which could impact the survival of the company, the independent directors should step up because there's a management failure. Very clearly, there's a management failure in Paytm Payments Bank today. And sadly, the investors are paying the price for a management failure. And I think what the RBI has done is perfectly right. It's not against innovation. It is not against new things. It's not against fintech. Because as you grow bigger and bigger, fintechs have to comply. You can't have a situation when you become so big and you don't comply with the regulator, and all others are complying. All others are regulated entities, and the system is the same for everybody. You can't get a special dispensation for very long. When small, it is fine because you do some innovation at the edge, it doesn't impact the system. When you go to a particular size, and Paytm has been pretty big size, you have to comply, and you must take it very, very seriously.

H

Host1:03:32

Mr. Mohandas Pai, on the board supervision and the justified action from the regulator, but I wanted to ask you, given the gravity of the concerns that RBI seems to have highlighted, what is the way out for Paytm Payment Bank? What is the way out for Paytm that will also get impacted? In a sense, would you say this is the end of the road for Paytm Payment Bank, and what happens next?

T

T.V. Mohandas Pai1:03:54

No, I wouldn't say end of the road for Paytm Payment Bank because that is a decision that the RBI has to take. What the RBI has done is that you can't onboard new customers and from February 29th or whatever it is, you can't continue business. What I would expect is the independent directors of Paytm Payments Bank should have a talk with RBI, should look at all the non-compliances, promise RBI that within so and so time they will do it, and request RBI to come back for an inspection and give them some time, and then say if you comply, please allow us to continue business. Because RBI could shut them down, and RBI has shut down many companies. It is the prerogative of RBI. You can't question the prerogative of RBI because RBI has given time. You see, the confusion has been created because in the final letter, they said we're going to take this regulatory action. They should have put a sentence there: we have asked Paytm over the last 22 months to clean up the act, blah blah blah, and we had multiple visits, multiple audits, multiple this thing. Despite giving them 10 to 12 months, despite all this, they have not been able to comply, and now therefore we do this. If they had done that, I think it would have been very clear to the public because I see a lot of sympathy among fintechs saying, 'Oh, you can't do this, why are you doing this?' Some group of people writing letters to do this. I mean, the finance ministry will not revoke this, they will not do it. RBI will not revoke it. You can't be susceptible to pressure from a small lobby to say, 'Oh, we are the greatest on the planet, we are very different, you must treat us different.' How come? I mean, it's a question like RBI says of compliance, of protecting consumers, and protecting the integrity of the financial system. So I think there's a failure there, and RBI has given adequate time. If RBI has not given them time, we could plead with RBI, 'Please give us more time, we are in the process of compliance.' RBI has given time. And one of the things that comes out is that the system or the same, what about the confidentiality of data with a payment bank? The data of a bank has to be confidential. It cannot be revealed to anybody, including the owner. It has to be treated as a private asset because it is not the property of the bank. The bank is a trustee of the data of everybody. Now if the holding company gets access to all the data and everything, that's a breach of confidentiality. You can't do that. You have to have the same system.

H

Host1:06:19

Yeah, you seem to then differ with a handful of startups that have penned this letter to the regulator, to the government, to reconsider this action and give a window of opportunity to Paytm to explain themselves.

T

T.V. Mohandas Pai1:06:34

No, I differ from them because they don't seem to understand the gravity of the situation. You can't have a cowboy management running in the financial sector. Now you got Dr. Soumya Kanti Ghosh on your panel, right? He's a very eminent economist, he's from the SBI. You ask him what focus SBI has on compliance. The chairman personally takes responsibility for compliance. They have compliance systems, they comply with everything, and they've been doing it for 250 years. So has HDFC Bank. HDFC Bank was rapped on the knuckles. Now HDFC Bank is the largest private sector bank, extremely well-run bank. And RBI is right. RBI has taken action against NBFCs, RBI has taken action against regulated entities. It's the duty of the regulator to make the system. And if a group of fintech founders feel they are above the law, above regulation, they must think again. I would have respected if the independent directors of Paytm Payments Bank had come together, written to RBI saying that look, we will now set up a group, we will do all this, we promise you, please consider. That would have been something. Because these are third parties. I don't think this group of people know all the matters about what has happened over the last 22 months. Because the governor said look, a lot of things have happened in the last 22 months. I don't want to get into details because that is between the payment bank and RBI. So this is a case of a lackadaisical attitude in a regulated business. When you run a business that is regulated, you have to comply. There are no two opinions. And if there are some lapses, you must get time. And they've been given 22 months. For 22 months you're not able to comply, then what do you want to do? You want somebody to not comply with regulations which have been laid down for everybody and do whatever you want? I mean, you can't do that, right? That's not the way the financial system works.

H

Host1:08:25

Yeah, Mr. Mohandas Pai, do stay on. Let me have a quick word with Mr. Prakash Diwan as well, because the stock, as we can see, is down by close to 10% now as we speak for Paytm. Mr. Diwan, quick thoughts on what the governor said, what's next for Paytm?

P

Prakash Diwan1:08:44

I wish I knew that so clearly, but yeah, what seems to be evident from all these details that were shared at the conference is that it's, you know, the good news is that it's not a systemic issue. It's not something where the RBI is concerned about certain trends in the way some of the fintechs would operate. It's very specific to this business, to this company. And you know, last couple of days we saw some bottom fishing. People probably thought, you know, whatever damage had to be done in terms of the Paytm Payment Bank issues would probably not rub off onto the main listed stock. But that doesn't seem to be the case. So till they find a solution to get out of this, you know, this disentangling themselves with the bank, the payment bank business, I think the main business will probably keep getting impacted negatively. But surprisingly, the last comment that we saw from the deputy governor very clearly told you that there's absolutely no concern about the Paytm business, and that is the one that we actually look at on the listed space, right? So if that were the case, it should not have more bearing than what the damage that's already been done. But I think it's more of lack of certainty, lack of clarity in terms of the next steps. That's what's plaguing the markets right now. So I would believe it's still a falling knife. It hasn't changed much from the last few days, the last couple of weeks, in fact, ever since this news broke out. The market will probably move on to better opportunities and not bother too much about whether there's revival which is imminent or not. Well, still a falling knife.

H

Host1:10:27

Mr. Pai, just final thoughts before we let you go. What is the larger takeaway from this Paytm saga for the startup ecosystem, for fintechs going forward from here?

T

T.V. Mohandas Pai1:10:40

Message to fintechs, to all innovators and startups is: when you are in a regulated industry, please comply. Please put in processes, please have good governance, please make sure you do regular audits, please talk to the regulator and work with them to make sure you're on the straight path. You are a small company doing innovation at the edge, it is fine. Even if you make mistakes, the regulator will forgive you. But when you become larger, you have to comply. Compliance is important. Because of all this, don't act like cowboys who believe that they are the greatest people on this planet. We've seen many regulatory failures. We've seen what happened to BharatPe, has not been compliant with regulations in submitting accounts. We have seen that, you know, some motor company, right, I forget the name, not compliant. I mean, they don't pay attention. This is a problem with all these founders. They must pay attention. Whether you're small or big, you have to pay attention. You have to do it. You have to follow the law. You have to follow regulations. That is the message. And happy that the governor is saying we're going to release a FAQ for them because this is not about innovation. This is not about young fintechs. Fintech should be encouraged, innovation should be encouraged, technology disruption should be encouraged. But they have to be within an umbrella of light regulation, then full regulations for a period of time. We can't let them come into a regulated system. We are dealing with people's savings and all. Lack of KYC and all that cannot go on for long. And here in this case, RBI has given you 22 months. For 22 months if you're not able to do it, 22 months I think was much before the listing, am I right? I don't know, somebody on the panel should say. Was 22 months before the listing. Now I wonder whether this notice was discussed as a risk factor at all. I don't know. It should be there in the risk factor. So I think people have to be careful, follow the law, focus on regulation, focus on compliance, do compliance audit, have independent directors on the board and put them in charge of compliance so that they have oversight. And if you don't, fail as a management, take it seriously because RBI is not going to keep quiet and MCA is not going to keep quiet. They will enforce the law, and there is a law that we have to obey.

H

Host1:12:54

Okay, Mr. Pai, just very quick last question. You don't expect the startup ecosystem to be impacted? No loss of confidence?

T

T.V. Mohandas Pai1:13:02

No, no, there's no loss of confidence because this happens all around the world. This happens all around the world. There's a creative tension between innovators and fintechs and regulators all around the world. There's a common issue all around the world in this area.

H

Host1:13:14

Thank you. Okay, that's very important, sir. Thank you very much indeed for joining us. Prakash, just one last word from you. You heard the chapter and verse how the governor explained how many bilateral contacts they have had with the Paytm management and how this was announced at the end of 22 months of toing and froing with the management. We don't know, Mr. Pai has raised the issue of independent directors, whether they bilaterally engaged with them, we don't know.

P

Prakash Diwan1:14:13

An investor would be better placed not to add to it, not to try averaging out, not bottom fishing, because this is something where there has to be some finite, you know, more definitive decision making that will happen at the end of the RBI. And existential risk on the company's payment bank needs to get sorted before you start buying into it. So the advice is just to stay away. If you are unfortunately invested, you get a chance to exit, you probably would have to look at exiting from the stock.

H

Host1:14:41

No, okay, fair point. And they are coming with an FAQ shortly, maybe as early as tomorrow, so that might give some clarity. That FAQ may be only for consumers, we don't know, but certainly it will give investors also some clarity. They repeatedly said that FAQ is coming. It was in the governor's seven points that he made on Paytm as well. Thank you very much, Prakash, and many thanks to our economists and bankers as well for your patience. Well, first up, NJ, what have you taken away? Are you getting the sense that more rate hikes have to happen from the banks' end? Because at least three times the governor said that their hikes have not been passed on commensurately.

N

NJ1:15:25

So we've discussed this before that as far as the deposit side is concerned, we've seen a fairly significant transmission. I think it's pretty much in line with what has happened on the repo rate. On the lending side, I think there's a competitive pressure, there is competitive intensity, and that is probably having a bit of an effect on how much of this is getting passed. But please bear in mind that a large part of banks' portfolio is now linked to external benchmarks like repo. So as and when the repo changes, the pricing changes. To some extent, the margin is a function of what is the competitive pressure, and that's probably what the governor was referring to. But we need to see how it evolves over a period of time. Please do bear in mind that the cost of funds has undergone a significant change, has increased over the last say about six months or so, and a bit of that is getting passed through.

H

Host1:16:14

Okay, are you getting a sense that they are going to keep the call at 6.5, not at 6.75?

N

NJ1:16:18

Well, I'm certainly hoping for that because the month of December and of January was also on the upper end of the corridor. So I'm hoping that now with these actions that Reserve Bank has taken and the fact that government spending is expected, we will see better liquidity outcomes in the system.

H

Host1:16:38

Okay, thank you very much, NJ, for joining us. Ashish, same question to you. What are you now looking at in terms of call rate? What did you take away, and therefore does pressure of this chasing for deposits reduce at all?

A

Ashish1:16:55

So clearly, I do expect call to move around 6.5% because RBI has already demonstrated the desire to manage it around the repo level. In fact, he actually made a statement that they would want it to be near about the repo level. So I'm hopeful about that. But another key takeaway is obviously about the transmission bit, which you did discuss with NJ. I think very, very clear transmission incomplete in the credit market. So basically, the transmission has to sort of continue. So I would think that that bit is something which is holding back RBI. Another just an important thing I would like to put into perspective is a lot of debt that has been created in the world is the liability side of the governments and the assets side is with the private sector. So what we have seen is a lot of deleveraging that has happened. We'll actually find it difficult for banks to grow credit in a meaningful manner, and that's why the competitive pressures will set in. And now whether the problem is with the credit spreads transmission or is it with liquidity spreads, we'll have to figure out. I think what the governor indicated and hinted is towards credit risk premium getting priced well, but that has to be seen in the context of the overall supply of credit that will eventually emerge.

H

Host1:18:28

Okay, okay. Yeah, I think this will require more fleshing out. But what you're saying is that cost of capital for companies can rise.

A

Ashish1:18:37

I think so, yes, absolutely.

H

Host1:18:41

Okay, okay, thanks a lot for that, Ashish. Let me come to Sam and Pranjul now, the economists. Sam, what did you take away in terms of what the governor said? You don't smell change in stance anytime soon. Where do you smell the next rate cut at all?

S

Sam1:19:00

Yeah, thank you for having me on the show. I think before I start, one interesting take from the policy is basically I call it a competitive forecasting. Because if you remember, last two years the RBI forecast was lower than the government. So this year, the RBI has straight away put the forecast for next year at 7%. So this actually gives, and with inflation at 4.5%, this gives the government leeway to have a higher nominal GDP target. So this means that the next year fiscal deficit target could actually be lower than 5.1% if we just go by the same estimates. So that is one positive thing for the market. In terms of the other discussion on the liquidity, I think the government cash balances continues to be an elephant in the room. It has again increased to 3.8 trillion as on yesterday. It had declined to 2.7 trillion a month back. I think what is happening is that the conditionality is attached to the spending the government is doing, and that is also applied to the states also. That is clearly having an impact on the cash balances, and this is going to be a longer term play in horizon because we have seen it in the RBI report. And possibly if this is the new norm, I think government spending will continue to remain elevated, and that could actually have a constraining impact on the core liquidity and the system liquidity moving in different directions. But the good thing over here is that I think the central...

H

Host1:20:22

Yeah, but one minute, one minute, Sam. Sam, one minute on that. The governor seems to have said that they will manage, you know, remain nimble and flexible in the liquidity management through two-way fine-tuning operations in both repo and reverse repo. We will deploy an appropriate mix of instruments to modulate both frictional and durable liquidity. Have they almost promised that they will behave like they behaved in the last 10 days, that is, give long-term repos and manage the shorter-term reverse repo? That is, they will take up the responsibility of keeping liquidity in such a way that call remains at 6.5. Is that a giveaway from this policy?

S

Sam1:21:04

Yes, I think that's a giveaway. Because the simple analogy is that government cash balances is supposed to be a temporary liquidity injection or withdrawal. So you can't inject open market operation, which is a permanent injection. So we have to replace a temporary withdrawal or injection of government cash balances with a temporary injection or withdrawal of variable rate repo. So I think therefore it's clear in his intent that it will only inject reverse repo or repo with a different time tenor so as to get over what they call it frictional liquidity.

H

Host1:21:43

Fair, fair enough. That seemed to be the takeaway. So that's why the bond market doesn't seem to have reacted too much. A bit of placidity in the bond market. It's the stock market which has reacted, probably because it was more expectation of dovishness, and actually the governor is talking about more rate hikes not getting adequately transmitted. That seems to have kind of captured the stock market's attention. Pranjul, your thoughts, your key takeaways? Did you get anything by way of any dovishness on inflation since they have brought down the inflation forecast for both the current quarter and the next quarter? So anything you're smelling in terms of inflation trajectory and therefore rate action or stance action?

P

Pranjul1:22:26

Not at all. In fact, if I have this one takeaway, the takeaway is that the RBI is in no mood urgently to ease monetary policy. And I think different parts of the policy gave the same message. You know, the fact that Michael Patra in the press conference said that they always wanted to align call money rate with repo rate at 6.5, but there was some exogenous reasons. My sense is that any movement of call falling most permanently from 6.75 where it was to 6.5 actually should not be seen as easing by the RBI. It should just be that exogenous problems have been ironed out. They are very clear that their stance is all about getting to 4%. The governor kept saying that the last mile is the hardest. They don't want to give up in the last sort of mile at this point. I think one of the biggest fears that came out was the governor actually spoke about it a couple of times that markets are front-running central banks all around the world, and they just don't want the same thing to happen in India, especially when we have situations like Red Sea that are actually increasing input costs around the world. And then finally, growth. Right, you know, when you have a 7% GDP growth for the next 12 months, do you really need monetary policy easing at this point of time? So putting all of this together, my one single most takeaway is that there is no sort of rush to ease monetary conditions in any way at this point.

H

Host1:23:51

Okay, okay. Well, Sam, let me just try one last. The panel's answer is pretty definitive that they're not hinting at a rate cut anytime soon. See, when they come into the August or the October policy, they may have one reading which is even below 4% because the average for that quarter is 4%. It is possible they may have even one Fed rate cut behind them. So would you still rule out a rate cut in the current year, or is it very likely in August or September, October?

S

Sam1:24:23

So I think in the best case, we had factored in a rate cut in August. But as you correctly said, that in September when you have the readings, I think July and August, the numbers will be lower than 4%. So at this point, the RBI could have two to three numbers on the table which could give it a clear direction that it's moving down lower. So maybe the best case could be that the next bid for a rate cut could actually get extended a little bit. But you should also remember that next year we are actually getting bond inclusion, so that will also act as a counterbalancing factor in terms of liquidity inflows. So everything, all of this remains on the table in terms of a liquidity which may get better as bond inclusion happens, and possibly if inflation goes below 4%, then the RBI can have a re-look.

H

Host1:25:12

Okay, well, thank you, gentlemen, and thank you very much for your patience while we discussed what was the elephant in the room, the Paytm issue. Ashish, NJ, Sam, and Pranjul, thank you very much for joining us. Well, I would look at five key takeaways from the Reserve Bank's policy. One, they look a little more determined to keep the call rate at 6.5, and that's very important for, you know, the deposit-raising banks. Perhaps there will be a little more liquidity provided, and therefore this mad rush for raising deposit rates could perhaps abate a bit. Secondly, that doesn't mean lending rates come down. They clearly want more, you know, passing over transmission of the rate hikes, so it's not really immediate relief for the borrowers. The third point that seems to have come is that they've clearly separated liquidity and stance, and on rate action, it doesn't look like rate action is around the corner. I think a lot of data will have to be processed. Provided inflation comes in well below 4% in the mid-quarter, in the second quarter, we cannot really be very sure of a rate cut any time. Finally, on Paytm, it looks like a lot of water has flowed under the bridge, and the Reserve Bank has given a lot of bilateral attention to the bank, and this appears to be at the end of a series of actions and warnings and caution already given by the Reserve Bank to the payments bank. And therefore, those who are investors must watch out. Those who are consumers, the Reserve Bank is going to definitely make all kinds of conveniences available, and an FAQ is coming very soon, probably as early as tomorrow or definitely Monday from the Reserve Bank, which will perhaps inform consumers and investors a little more about the future of the Paytm Payments Bank. Those were the five takeaways from the Reserve Bank. Very aggressive on growth, I forgot that, that's the fifth one. Extremely positive that the growth of the economy is not marred. So 7% on the table, something which even the government didn't go with. On that note, from me and Ritu, saying thank you very much for joining this special monetary policy coming straight to you from Mint Street. After a break, we will get back to markets and to the stock-specific action.

S

Shaktikanta Das1:30:01

The Monetary Policy Committee, that is MPC, decided by a 5 to 1 majority to keep the policy rate unchanged at 6.5%. Consequently, the Standing Deposit Facility rate remains at 6.25%, and the Marginal Standing Facility, that is MSF rate, and the Bank Rate at 6.75%. The MPC also decided by a majority of 5 out of 6 members to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth. Headline inflation has remained high and has seen considerable volatility, moving in a range of 4.3% to 7.4% during the current financial year. The CPI inflation target of 4% is yet to be reached. Monetary policy, in the midst of these lingering uncertainties, has to remain vigilant to ensure that we successfully navigate the last mile of disinflation. Now, the last mile of disinflation is always the most challenging, and that has to be kept in mind. CPI inflation, that is Consumer Price headline inflation, is projected at 5.4% for the current year, that is 2023-24. So that is for the current year 2023-24, we are projecting CPI inflation at 5.4%, with the fourth quarter, that is the current quarter, projection of 5%. Now, assuming a normal monsoon for the next year, CPI inflation for the next financial year 2024-25 is projected at 4.5%. Domestic economic activity remains strong. The first advance estimates placed the real gross domestic product, that is real GDP growth, at 7.3% for 2023-24, that is for the current year, making this the third successive year of growth of above 7%. Going forward, the momentum of economic activity witnessed during the current year, that is 2023-24, is expected to continue in the next financial year also, that is in 2024-25. Real GDP growth for 2024-25, that is next financial year, is projected at 7%. Financial market segments have adjusted to the evolving liquidity conditions in varying degrees. While the short-term rates have fluctuated, long-term rates have remained relatively stable. In the credit market, however, monetary transmission remains incomplete. Let me reiterate, and this is very important, let me reiterate that our policy stance is in terms of interest rate, which is the principal tool of monetary policy in the current framework. Our stance of withdrawal of accommodation should be seen in the context of incomplete transmission and inflation ruling above the target of 4% and our efforts to bring it back to the target on a durable basis.

Global Order, the contribution of the Reserve Bank is getting widely recognized both within and outside the country. The global economy continues to present a mixed picture. On the one hand, the odds of soft landing have increased with inflation moving closer to the target and growth holding up better than expected in major advanced and emerging market economies. On the other hand, the ongoing wars and conflicts and the emergence of new flashpoints in different parts of the world, with disruptions in the Red Sea being the latest in the series, impart uncertainty to the global macroeconomic outlook. In this unsettled global environment, the Indian economy has performed remarkably well in the recent years. Growth is accelerating and outpacing most of the forecasts, while inflation is on a downward trajectory. At the current juncture, India's potential growth is propelled by structural drivers like improving physical infrastructure, development of world-class digital and payments technology, ease of doing business, enhanced labor force participation, and improved quality of fiscal spending. Our multipronged, proactive, and calibrated policies on the monetary, regulatory, and supervisory fronts have worked well to maintain and strengthen macroeconomic and financial stability. Let me now turn to the decisions and deliberations of the Monetary Policy Committee meeting. The Monetary Policy Committee, that is MPC, decided by a 5 to 1 majority to keep the policy rate unchanged at 6.5%. Consequently, the Standing Deposit Facility rate remains at 6.25%, and the Marginal Standing Facility, that is MSF rate, and the Bank Rate at 6.75%. The MPC also decided by a majority of 5 out of 6 members to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth. Headline inflation has remained high and has seen considerable volatility, moving in a range of 4.3% to 7.4% during the current financial year. The CPI inflation target of 4% is yet to be reached. Monetary policy, in the midst of these lingering uncertainties, has to remain vigilant to ensure that we successfully navigate the last mile of disinflation. Now, the last mile of disinflation is always the most challenging, and that has to be kept in mind. CPI inflation, that is Consumer Price headline inflation, is projected at 5.4% for the current year, that is 2023-24. So that is for the current year 2023-24, we are projecting CPI inflation at 5.4%, with the fourth quarter, that is the current quarter, projection of 5%. Now, assuming a normal monsoon for the next year, CPI inflation for the next financial year 2024-25 is projected at 4.5%. Domestic economic activity remains strong. The first advance estimates placed the real gross domestic product, that is real GDP growth, at 7.3% for 2023-24, that is for the current year, making this the third successive year of growth of above 7%. Going forward, the momentum of economic activity witnessed during the current year, that is 2023-24, is expected to continue in the next financial year also, that is in 2024-25. Real GDP growth for 2024-25, that is next financial year, is projected at 7%. Financial market segments have adjusted to the evolving liquidity conditions in varying degrees. While the short-term rates have fluctuated, long-term rates have remained relatively stable. In the credit market, however, monetary transmission remains incomplete. Let me reiterate, and this is very important, let me reiterate that our policy stance is in terms of interest rate, which is the principal tool of monetary policy in the current framework. Our stance of withdrawal of accommodation should be seen in the context of incomplete transmission and inflation ruling above the target of 4% and our efforts to bring it back to the target on a durable basis.

The Monetary Policy Committee, that is MPC, decided by a 5 to 1 majority to keep the policy rate unchanged at 6.5%. Consequently, the Standing Deposit Facility rate remains at 6.25%, and the Marginal Standing Facility, that is MSF rate, and the Bank Rate at 6.75%. The MPC also decided by a majority of 5 out of 6 members to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth. Headline inflation has remained high and has seen considerable volatility, moving in a range of 4.3% to 7.4% during the current financial year. The CPI inflation target of 4% is yet to be reached. Monetary policy, in the midst of these lingering uncertainties, has to remain vigilant to ensure that we successfully navigate the last mile of disinflation. Now, the last mile of disinflation is always the most challenging, and that has to be kept in mind. CPI inflation, that is Consumer Price headline inflation, is projected at 5.4% for the current year, that is 2023-24. So that is for the current year 2023-24, we are projecting CPI inflation at 5.4%, with the fourth quarter, that is the current quarter, projection of 5%. Now, assuming a normal monsoon for the next year, CPI inflation for the next financial year 2024-25 is projected at 4.5%. Domestic economic activity remains strong. The first advance estimates placed the real gross domestic product, that is real GDP growth, at 7.3% for 2023-24, that is for the current year, making this the third successive year of growth of above 7%. Going forward, the momentum of economic activity witnessed during the current year, that is 2023-24, is expected to continue in the next financial year also, that is in 2024-25. Real GDP growth for 2024-25, that is next financial year, is projected at 7%. Financial market segments have adjusted to the evolving liquidity conditions in varying degrees. While the short-term rates have fluctuated, long-term rates have remained relatively stable. In the credit market, however, monetary transmission remains incomplete. Let me reiterate, and this is very important, let me reiterate that our policy stance is in terms of interest rate, which is the principal tool of monetary policy in the current framework. Our stance of withdrawal of accommodation should be seen in the context of incomplete transmission and inflation ruling above the target of 4% and our efforts to bring it back to the target on a durable basis.

Accommodation should be seen in the context of incomplete transmission and inflation ruling above the target of 4% and our efforts to bring it back to the target on a durable basis. The Monetary Policy Committee, that is MPC, decided by a 5 to 1 majority to keep the policy rate unchanged at 6.5%. Consequently, the standing deposit facility rate remains at 6.25% and the marginal standing facility, that is MSF rate, and the bank rate at 6.75%. The MPC also decided by a majority of five out of six members to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth. Headline inflation has remained high and has seen considerable volatility, moving in a range of 4.3% to 7.4% during the current financial year. The CPI inflation target of 4% is yet to be reached. Monetary policy in the midst of these lingering uncertainties has to remain vigilant to ensure that we successfully navigate the last mile of disinflation. Now, the last mile of disinflation is always the most challenging and that has to be kept in mind. CPI inflation, that is Consumer Price headline inflation, is projected at 5.4% for the current year, that is 2023-24. So that is for the current year 2023-24, we are projecting CPI inflation at 5.4% with the fourth quarter, that is the current quarter, projection of 5%. Now, assuming a normal monsoon for the next year, CPI inflation for the next financial year 2024-25 is projected at 4.5%. Domestic economic activity remains strong. The first advanced estimates placed the real gross domestic product, that is real GDP growth, at 7.3% for 2023-24, that is for the current year, making this the third successive year of growth of above 7%. Going forward, the momentum of economic activity witnessed during the current year, that is 2023-24, is expected to continue in the next financial year also, that is in 2024-25. Real GDP growth for 2024-25, that is next financial year, is projected at 7%. Financial market segments have adjusted to the evolving liquidity conditions in varying degrees. While the short-term rates have fluctuated, long-term rates have remained relatively stable. In the credit market, however, monetary transmission remains incomplete. Let me reiterate, and this is very important, let me reiterate that our policy stance is in terms of interest rate, which is the principal tool of monetary policy in the current framework. Our stance of withdrawal of accommodation should be seen in the context of incomplete transmission and inflation ruling above the target of 4% and our efforts to bring it back to the target on a durable basis.

Y

Yogesh2:16:32

Hello everyone and welcome to this post-policy press conference. With us today we have respected Governor Shaktikanta Das. I had said last time, just say Governor. Okay sir, we have Shaktikanta Das, Governor, Reserve Bank of India with us, along with Dr. Michael Patra, Shri M. Rajeshwar Rao, Shri T. Rabi Shankar, and Shri Swaminathan. Along with us also are our executive directors, Dr. O.P. Mal and Dr. Rajiv Ranjan, and my colleague from MPD and the Secretariat. So we have 22 media persons present here. And as is our want, we will first go with your opening remarks and then we go for the press conference. Over to you.

S

Shaktikanta Das2:17:22

Thank you for being here. Good morning. You have already heard the statement; it's been uploaded also. As a part of initial remarks, I would like to make nine points. First, domestic economic activity continues to be strong. We expect the real GDP to grow by 7% in the next financial year 2024-25. Second point, CPI inflation is moderating with intermittent interruptions and spikes. We have to remain vigilant about the incoming data and the outlook. Our endeavor to achieve 4% inflation on a durable basis has to continue. Third, globally, markets are front-running central banks in anticipation of policy pivots, but central banks remain apprehensive and await a more durable alignment of inflation with the targets. Four, liquidity will be actively managed by the Reserve Bank. Five, our multi-pronged, proactive, and calibrated policies have worked well to maintain and strengthen macroeconomic and financial stability. Six, systemic, sectoral, and institution-specific signs of stress are being proactively monitored and acted upon wherever necessary. Seven, let me reiterate that good governance, robust risk management, sound compliance culture, and protection of customers' interest are the hallmarks of the Reserve Bank's approach to the safety and stability of the financial system and individual financial institutions. Regulated entities must accord the highest priority to these aspects. This is the seventh point. The eighth point is the external sector of the economy remains resilient. The current account deficit is expected to be eminently manageable. Nine, the exchange rate of the Indian rupee has remained stable. Thank you.

Y

Yogesh2:20:02

Thank you, sir, for those opening remarks. And may I request all of you to wait for your turn to be called and request also to stick to one question. And if you have time, we'll go for the other or second or third question. So I'll begin by inviting L. Venkatesh from CNBC TV18.

L

L. Venkatesh2:20:27

Thank you, Governor. Thank you, Yogesh. Well, sir, I'm a little confused about whether you are distinguishing between liquidity and your stance. You have mentioned in three places that the entire rate hike has not been fully transmitted. So I assume you want more hike transmitted. But separately, you have said that you will manage liquidity, paragraph 21, in great detail, that you will manage liquidity with a bunch of instruments. Should we understand, therefore, that unlike the majority of the last five months when call was closer to 6.75, you will be more like you were in the last one week, where you will give long-term liquidity through variable rate repo and adjust for short-term, which is keep call rate closer to 6.5? Is that what you are trying to say? That I'll do that, but I want more interest rate hikes to happen. And sir, since you have dwelt twice on this good governance, I must add, are you trying to say that you will not give Paytm any further timeline to set them right? Does February 29 stand? Is that what...?

Y

Yogesh2:21:42

There are two questions actually, two questions. So please, please ask one question each. The first part of the question, I would request Deputy Governor Michael Patra to reply. The second part, I would request Deputy Governor Swaminathan to reply. Go ahead.

M

Michael Patra2:21:57

As Governor has clarified in his statement, the stance is all about the future course of policy rates. Liquidity is endogenous to the rate. When the rate is the chief instrument of monetary policy, liquidity follows the rate. You have to move liquidity to achieve a certain rate. So our objective is to keep the repo rate, keep the weighted average call rate around the repo rate. But there are times when there are temporary drivers of autonomous liquidity, like government balances, which go through tectonic shifts, and market participants take time to adjust. Even they are unsure about the future direction of this. So that is why sometimes the call rate goes to where it went. But you saw that we were nimble in our actions and we brought it down to the repo rate. That is our endeavor.

L

L. Venkatesh2:22:51

You were nimble after five months. So I'm asking, will you be like the previous five months or will you be like the last five days?

M

Michael Patra2:22:56

No, that is not correct. Because at the time when the rates were up, we allowed market participants to take what liquidity they wanted from us through our standing facilities, and we did the main operation every 14th day. So it was not that we let... but it was the market participants, still you saw the reactions of the VRR, they were unwilling to let go because they're unsure about how balances will move.

S

Swaminathan2:23:30

See, as you know, as a matter of policy, we don't comment on individual entity or actions that we initiate in such cases. But anyway, since this question is on the uppermost of mind of most of you, I think I would like to say two-three things essentially to set the context. What you know, while we don't want to be discussing the individual details here because that will not be proper, in terms of context, as you all know, that this is a supervisory action on a regulated entity for a persistent non-compliance. Second, such supervisory actions are invariably preceded by months and at times years of bilateral engagement, where we not only point out the deficiencies but also provide more than adequate time for them to take corrective action. Third, of course, is in terms of, as a regulator, it's incumbent upon us to protect the interest of the ultimate consumer and thereby protecting the stability of the financial system. So these actions have to be seen in that particular context. Coming to the second part of your question, what lies ahead, you know, as part of MPC, we don't give a forecast in these matters. So I think you will have to wait. And of course, we have been getting feedback, we'll work on it, and as a responsible regulator, suitable steps will be taken to ensure that the customer inconvenience, if any, is minimized. So we will take care. I think with that, we can give a rest to this question and then move on to MPC, is my request. Thank you.

Y

Yogesh2:25:08

Thank you, sir. I'll move on to Mr. Gaurang Rangan from Economic Times.

G

Gaurang Rangan2:25:12

Thank you, sir. Good afternoon, Governor. For the rate decision, rather, I would say the status quo, you specifically mentioned that the transmission of 250 basis points is still continuing. So the bankers say that the deposit rates have already gone up by 225 basis points and the lending rates have also gone up. So what in your mind is the actual transmission that has not happened, and how much is that? And what is the benchmark that you're looking at to conclude that the transmission has happened? Thank you.

Y

Yogesh2:25:47

Okay, again, you know, like the previous questions, I would request, I think, DG Swaminathan supplemented by DG Michael Patra to reply to that question. Let there be wider participation. I don't want to monopolize all the answers. So, yeah, go ahead.

S

Swaminathan2:26:02

Yeah, see, as far as the transmission in a hiking phase, as we have always seen in the past, the rates on the deposit side, the resets much faster and they get passed on. And as we have seen, repo rates have almost played out. While on the lending side, it does take time to pass for two critical reasons in our assessment. There are two major reasons. One is that, you know, the proportion of loans that are benchmarked externally, what we call EBLR-linked loans, is still less than 50%. So where the transmission could be instant is only where the EBLR comes into play. In case of other instruments, other benchmarks like MCLR or base rates or fixed-rate loans, it does take time to transmit. So that is the precise reason why we still see that transmission is fully not in place. The second, also in the hiking phase, we have seen banks in their anxiety to maintain their market share in the incremental credit also adjust their margins so as not to, you know, lose their market share in the incremental credit. So that also impedes a complete transmission in terms of the effective interest rate. So I hope, as we understood from the context of these two parameters. Thank you.

Y

Yogesh2:27:24

Anything you would like to supplement? No. Yeah, I'll move on to Mr. Anun Mishra from ET now.

A

Anun Mishra2:27:33

Thank you, sir. I would like to ask a question once again on the Paytm issue. We understand there has been a meeting with the Paytm officials and the Bank of India. What transpired in that? I know I don't want to know the exact details, but from the financial system point of view, the company has been claiming that they have taken all the remedial measures and all the efforts are being made so that there is minimal or no impact on customers. So from that point of view, is there any remedial measure which has been suggested by Reserve Bank of India?

S

Swaminathan2:28:11

I think this is again a matter of bilateral discussion, so I don't think that will be proper for us to discuss it in this forum. So as I said, discussing on individual entities will not be very proper, giving granular details in this matter. So we are seized of the issue, and as we take steps, we will keep the media and public certainly informed. Thank you.

S

Shaktikanta Das2:28:37

You see, as the Deputy Governor has already commented, I mean, sufficient, I'm again saying in a general sense, not specific to this case, we give sufficient time, you know, we give sufficient time to every regulated entity, every entity that is supervised by the Reserve Bank to comply with the requirements, the regulatory requirements. We give sufficient time, and sometimes, as he pointed out, sometimes it may even look more than sufficient time. And we would not like to act, you know, we are a responsible regulator, we are a responsible supervisor. If everything had been complied, I'm talking about in a general sense, why should we act? I mean, after all, we have a responsibility. We are, it's a responsible institution, RBI. So that's how it is. Yeah, thank you.

Y

Yogesh2:29:34

Thank you, sir. Allia Radio.

A

Allia Radio2:29:45

Sir, regarding the Paytm Payments Bank issue, what are the guidelines for floating rate interest for existing customers? Thank you, sir.

Y

Yogesh2:30:28

Sir, Business Today.

S

Shama Mishra2:30:30

Good afternoon, sir. I'll also make an attempt on, you know, Paytm. You know, DG Swaminathan talked about, you know, this persistent non-compliance, and he also said in such cases, you know, months and years of, you know, bilateral engagement. You know, my question is, why did RBI not consider, you know, appointing a director on the board of Paytm, you know, when you knew about this persistent non-compliance issues?

S

Swaminathan2:30:55

See, see, as a regulator, we have various tools in the kitty, and it's not necessary that every single tool will be deployed in every single situation. We make our own assessment to the scale and proportionate of the issue as well as the tool that we will have to use at different points in time. So one-size-fits-all kind of solution may not work in such situations. So, you know, I would like to stop there rather than, you know, trying to elaborate on that. We may use certain tools, may not use certain tools, but it is after a due consideration that we do. Thank you.

Y

Yogesh2:31:32

Thank you, sir. I'll move on to Mr. Anil Roy from Bloomberg.

A

Anil Roy2:31:35

Thank you, sir. Sir, the budget was non-inflationary and the government really brought down the fiscal deficit, etc., and the bond yields have fallen. So the government probably wants interest rates to come down, but RBI probably is keeping interest rates high. You're saying the transmission is not complete, etc. Is there a lack of coordination, sir?

S

Shaktikanta Das2:31:57

No, I mean, has the government said anywhere that they want the interest rates to be brought down? So therefore, it's a, I mean, it's a very speculative proposition, so I cannot reply to that question. Thank you.

Y

Yogesh2:32:12

Thank you, sir. I'll invite Shama Mishra from Dainik Bhaskar.

S

Shama Mishra2:32:17

Good afternoon, sir. So it's again on Paytm. The situation as we describe it, that Paytm is known as one of the pioneers of fintech, coming to this situation, do you see this as a worrisome situation for the entire sector? And what lesson would you like to highlight for any similar future companies?

S

Shaktikanta Das2:32:40

Now, let me sort of provide some broad guidance on this Paytm issue, because, I mean, there have been at least four or five questions till now, and there could be many more questions. So let me put the entire thing, you know, let me put the record straight. Now, you said that worry about the system and all that. There is no worry about the system at the moment. Here we are talking about a specific institution, a specific payments bank. As the Deputy Governor, Deputy Governor Swaminathan has already explained, he has provided several details. Similarly, I also don't want to comment on a specific case, but in this context, I would like to make some general observations, not with specific reference to Paytm as such, but some general observations which includes all our regulated entities. So all our regulated entities, it does not exclude Paytm, it is applicable to all the regulated entities. And in fact, this... No, no, no, the advice is the camera should not focus on this because I have written so many things, these are private parts, so the cameras can focus perhaps on my face. So, but let me, thank you, I think that's very agile on his part. So let me focus on some, make some general points, and I would like to, you know, make about six or seven points. Now, first is that over the last few years, as all of you are aware, we have significantly deepened our supervisory systems, approach, and methods. Number two, our emphasis is always on, as the Deputy Governor has pointed out, our emphasis is always on bilateral engagement with the regulated entity, and in that engagement, we give focus on, and we are completely focused on nudging the regulated entity to take corrective action. Let me rephrase it, our emphasis is always on bilateral engagement with the regulated entities with focus on nudging them for corrective action, and sufficient time is given for undertaking such corrective action. The third point, when such constructive engagement which we undertake, when that does not work, so when such constructive engagement does not work, or when the regulated entity does not take effective action, we go for imposing supervisory or business restrictions. Number four, such restrictions which we impose are always proportionate to the gravity of the situation. Please take note that such restrictions are proportionate to the gravity of the situation. Number five, all our actions, being a responsible regulator, being a responsible supervisor, all our actions are in the best interest of systemic stability and protection of depositors' or customers' interest. These aspects cannot be compromised. Individual entities should be mindful of these aspects for their long-term success. Number six, over the last few days, we have received a lot of queries, clarifications from various quarters, including members of the public. You have raised a few questions today. So we have noted all these questions and clarifications which have been sought from us, and based on that, we will be issuing a FAQ sometime next week. So that should address all these questions and clarifications which are being raised by you and which have been raised in the public domain and raised bilaterally with us from various quarters. Number seven, finally and emphatically, let me stress and let me emphatically state that the Reserve Bank is and will continue to encourage and support innovation and technology in the financial sector. Let there not be any doubt about Reserve Bank's commitment to promote fintech, to promote innovation, to promote technology in the financial system. Thank you.

Y

Yogesh2:37:59

Thank you, sir. I will move on to Mr. D.H. Krishan from Moneycontrol.

D

D.H. Krishan2:38:06

Thank you, Yogesh. Thank you, Governor. I have a very short, related question, sir. You know, in your remarks, you stressed about the good governance and sound compliance, and this is not something that you're speaking for the first time. You have been emphasizing this part, and the role of the boards in the regulated entities is extremely critical, as you have pointed out. What is your view on the role of the Paytm board? Because, you know, it didn't happen all of a sudden. Since 2021, RBI has been alerting the regulatory breaches, and as per the process, the RBI on-site inspection report is passed to the ACB and the board for corrective action. So probably, you know, if they had acted on time, things would not have worsened to this level. So why is the regulator silent on the role of the board, while the reasons for this action is quite evident?

S

Swaminathan2:38:58

You see, typically we do not share such granular information. We have been engaged with the institution, with the entity, for quite some time, and within that, with whom we interacted and how it was, such granular details, it will not be appropriate on our part to share those details. Thank you.

Y

Yogesh2:39:22

Thank you, sir. I'll move on to Mr. Vishnath from NDTV Profit.

V

Vishnath2:39:25

Hi, sir. Thank you so much, Yogesh. I'll give a little respite and move to another topic. But on CBDCs, you're talking about introducing additional programmability...

S

Shaktikanta Das2:39:36

No, we don't need any respite. The topic of Paytm... go ahead. But the point is, you know, the same question is coming up, and also in as much as we are issuing a FAQ, so I would request if you have still some clarification or something on which you want clarity, I think you can send it bilaterally to us directly, you can mail it to us. We will see to what extent we can address that question. Yeah, sure.

V

Vishnath2:40:05

My question is with regard to the additional programmability that you're proposing to bring in with respect to the CBDC pilot. The question has been there since the beginning when this topic was introduced by DG Rabi Shankar. Doesn't this go against the fungibility of money? If the intent is to make CBDC the equivalent of paper currency, and if you introduce specific restrictions on usage, does the fungibility factor not go opposite to that?

S

Shaktikanta Das2:40:30

No, we are not imposing a restriction. I think we are making it more flexible. But let DG Rabi Shankar take that question.

R

Rishankar2:40:39

Thank you. You know, shifting to me, so I'll give a more formal answer. I think the best way to think about it is when a family puts some currency notes in a package to be used for, let's say, groceries during the month, it doesn't mean that the fungibility of the currency is lost. It's just that until that spending happens, it can be used for no other purpose. I'm just giving you as an example to be able to think on what we mean by fungibility, what we mean by programmability. When you do programmability, for a moment, fungibility is on hold. We have to realize that it's a facility that we are providing the currency. Again, by way of an example, let's suppose that a school has given some money to a student who won a prize to buy books in a particular shop. So the student can only use this money to buy books in that shop. That's intended. Suppose the student goes and buys that book, he cannot use it for any other purpose. As soon as the book is purchased and the currency goes to the bookshop owner, it again becomes fungible. So it's only for that period that fungibility is limited. Supposing he doesn't spend it, it goes back to the school, fungibility is restored. So it is a way of controlling expenditure that you do not get unless it's digital and that you do not get unless it's a token. It's a facility that is there, will use, and the facility will typically be agreed by both the recipient as well as the person who puts that condition. So no, to give a very short answer, it doesn't militate against fungibility. It's only a specific use binding.

S

Shaktikanta Das2:42:38

And to extend that reply further, imagine a situation where, you know, later on when CBDC is fully implemented at a later date, if the government wants to give some cash support to certain individuals for a specific purpose, programmability will be useful in such situations. So that the money, the cash which is going from government to such persons can be used for specific purposes. So therefore, it's typical for every household, in the beginning of the month, to do their own budget and set aside money, you know, one envelope for school fees, one envelope for electricity bills, and it happens. It's a common thing which happens in a large number of households. Yeah.

Y

Yogesh2:43:29

Next. Thank you, sir. I will request Manojit Saha from Business Standard.

M

Manojit Saha2:43:35

Thank you, sir. So I again go back to paragraph 21 on liquidity. So you said stance is with respect to rates and incomplete transmission. Does that mean that you are creating elbow room to do liquidity operations, OMO purchase, to infuse liquidity? Because March is going to be very tight, and then such liquidity operation will not be seen out of sync with the stance. So you're separating the stance from liquidity management, and you're saying it is only on rates. Does that give you elbow room to do purchase when liquidity will be very tight in March?

S

Shaktikanta Das2:44:16

You see, what we have attempted to do today is to, you know, clarify and clearly state that do not read the stance of monetary policy in terms of excess liquidity prevailing or deficit liquidity prevailing. That's not the point. Liquidity plays a secondary role to support monetary policy transmission. That is, there is a monetary policy, there is a repo rate, liquidity situation in the market. I think that is what the Deputy Governor said in the beginning itself. You clarified that we try to keep the liquidity at a level wherein the overnight call rate, which is the operating target of monetary policy, remains around the repo rate. In the first part of this year, due to various exogenous factors, there was a lot of liquidity. So we conducted variable rate repo auctions, but market took time to adjust. And banks, individual banks, make their own analysis of the liquidity situation, and that analysis by the banks also varies within a day. You look at yesterday, or was it day before, we did two VRR auctions. The response to the first one was very low, I think some 4,000 crores. But then we, same day, we did one more, and we got a response of 27,000 crores. So between morning auction when the banks offered 4,000 crores and to a subsequent auction in the afternoon, the banks offered 27,000 crores. So therefore, due to various autonomous factors, liquidity situation has been fluctuating in the market. Banks make their own assessments. Banks also take their own decisions. Markets and banks, meaning the banks and the markets, take time to adjust to the evolving liquidity situation. So far as the RBI is concerned, we will remain active, we will remain nimble in our liquidity management. What instruments we will utilize, that will depend on the prevailing situation, which will come up from time to time. I cannot say that we will use this and not use this. We have several instruments at our disposal. Depending on situation, we will use the most appropriate instrument. Also, let me ask one thing very straight, there are other people also, so I'll move on to Mr. Brajesh Kumar from Zee Business News.

B

Brajesh Kumar2:47:43

Sir, regarding hidden charges in loan term sheets, specified charges, borrower experience, terms and conditions, loan terms and conditions, customer interest, micro-digital lending, already statutory, one all-inclusive interest rate, but upfront interest rate, clarity, customer interest.

S

Shaktikanta Das2:49:51

You know, let us be very clear. The banks' terms and conditions are very transparent in the sense that all information is given. But experience, customers' interest, and I'm sure banks will encourage it because the banks are also interested in the banks are long-term players, so they are not, you know, short-term operators. No second question? Right. Customers, most important terms and conditions to give greater transparency. Thank you.

Y

Yogesh2:50:48

Dadisi Shukla from Financial Express.

P

P. Shukla2:50:53

Good afternoon, Governor, sir, DGs, Yogesh, sir. Just taking you back to where we started. DG sir said that there are various tools in kitty with regard to Paytm, how the future course of action will be taken. Sir, very specifically, banks are becoming very hesitant to actually partner with this bank, Paytm Payments Bank, for shifting their customers and their merchants in one go. They are saying that we need regulatory approval for that. So will you provide that, and will you allow the sale of their wallet to other potential payments banks?

S

Swaminathan2:51:34

See, it'll be very difficult to provide any hypothetical answers at this point in time. So as I said, that there's still time that is provided for customers to continue to access the services that is provided. So during this period, we will see what else needs to be done. And keeping, as Governor also said, that we keep the customer in the center of what needs to be done. So we will take appropriate steps. The second part of your question, in terms of what the other banks will have to do, each of them, it's a business decision. They have got to carry out the required due diligence as per their laid-down board-approved policies, and I'm sure that they will carry out that if they have got to do a partnership. So that's something which we will not comment at this point in time. But what tool and shape it will take is not something which we would like to speculate at this point in time. We may wait for the FAQs, which will give you more clarity.

P

P. Shukla2:52:29

Sorry, so banks don't need regulatory approval for taking on board the Paytm customers, is it?

S

Swaminathan2:52:34

It's very specific to a particular item. I think it's better for you to wait for the FAQs. Please be patient, let the FAQ come next week.

Y

Yogesh2:52:42

Okay, thank you, sir. I'll move on to Siti Bat from Reuters.

S

Siti Bat2:52:45

Thank you, sir. Governor, today you've said that next year's growth is projected at 7%. Nominal GDP growth, as per the budget, is projected at 10.5%. I mean, I don't know if my maths is wrong, but effectively that would mean inflation is at around 3.5% next year. Is that right? Are you being a bit too optimistic about growth, or is the government underplaying growth and being very modest in their projections? Thank you.

S

Shaktikanta Das2:53:13

So I think you take that question, because he likes to play these balls.

M

Michael Patra2:53:19

No, I will not venture to answer for the government. But my understanding of this is that what goes into the nominal GDP is not CPI inflation, it's the GDP deflator. And GDP deflator is always a weighted combination of CPI and WPI. Now, the WPI has been in deflation for most part of this year and is just emerging out of deflation. So that must be the reason. Thank you.

Y

Yogesh2:53:42

Thank you, sir. I'll move on to Mr. Mayur Shetty from Times of India.

M

Mayur Shetty2:53:49

Governor, in the development measures, you spoke about reviewing the AEPS, and some banks have come out with warnings of how AEPS-enabled payments... oh, APS, okay, yeah, and some banks have come out with warnings on how fingerprints can be cloned using silicon. Is that what's caused this thing? And also, since OTP is also being reviewed, does it mean that the forms of KYC are the best option for regulated entities?

S

Shaktikanta Das2:54:19

No, OTP is not being reviewed. What I'm saying is that over the years, it so happens that OTP has become the most popular and commonly used AFA, you know, that additional factor of authentication. But with the movement of time, various other technologies and methods have come up. So we want to just tell the players in the field that there are other methods also, and RBI will be agnostic to them as long as they are sound methods. The banks and institutions are free to adopt them. But I think let DG Rabi Shankar take the other part of the question with regard to the AEPS.

R

Rishankar2:55:05

Yeah, you sort of gave the answer in your question itself. It's basically to ensure that since this is being used in rural and such areas a lot, it's important that the safety of these transactions is ensured. Now, with the passage of time, as in the case of additional factor of authentication, we can use various technologies to do it. So that is essentially the position here. All touchpoint operators will go through a standardized, safe, and secure onboarding process. We can add, you know, we possibly can, as we have indicated, we can also add other factors into it. For example, the switch-on has to be done by the customer instead of it being pre-available on the system, or it can have daily limits beyond which it cannot operate. Whatever is required for the customers, the idea is that as Reserve Bank has always been placing a lot of emphasis on the security of digital transactions, which we believe is key to ensuring customer adoption, especially customers who are not savvy digitally. But this is an effort in that direction to improve the security of transactions. Thank you.

Y

Yogesh2:56:21

Thank you, sir. I'll move on to Mr. Hesh Yas from Indian Express.

H

Hesh Yas2:56:23

Hi, sir. Good afternoon, sir. There is an expectation that the stance would be changed to neutral. Sir, what are the preconditions for stance to become neutral?

S

Shaktikanta Das2:56:39

I cannot give a forward guidance on that. I think when such a thing happens, we will explain, you know, how it is. But you see, I'll tell you, the evolving situation continues to be very volatile and uncertain. You look at the commentaries coming out from the central banks, mostly of advanced countries. Sometimes they appear to be giving, once a particular, you know, giving a forward guidance in one particular direction, sometimes the market interprets the next guidance to be in a different direction. So therefore, at the moment, we are not giving any forward guidance with regard to stance or rate. When we will, you know, market is, there's a talk of when the central banks world over will cut rates. So, and as I have said, markets are, you know, overshooting, running ahead of the central banks. So I think preconditions, I will not be able to specify, unless Dr. Michael Patra wants to comment anything on that. So because, you know, these are very volatile times, and so therefore it's better to wait. And when something like that happens, we will explain it appropriately. Thank you.

Y

Yogesh2:58:03

Thank you, sir. I'll move on to Miss Gopika Gupta Kumar from The Mint.

G

Gopika Gupta Kumar2:58:07

Thank you, Yogesh. Good afternoon, Governor. Considering that your inflation forecast for next year is at 4.5% and GDP at 7%, and you're saying that RBI needs to be vigilant in the last mile of disinflation, does it rule out a rate cut in FY25? And secondly, on the Paytm issue, what is the larger issue? Is it the KYC, or is it something related to the ownership or interlinkage between a regulated and a non-regulated entity? Because if it is KYC, then does RBI need to relook at the minimum regulations around the minimum KYC accounts? That is my second question.

S

Shaktikanta Das2:58:47

No, you know, again, an institution or entity-specific details, we would not like to spell out. And let me leave it at that, because I cannot really share. It's a bilateral engagement between the RBI and the regulated entity. The regulations are there in their place. The regulations are robust. There is no need for, it is not a case where there was a regulatory deficiency or there was a regulatory correction required. It's an issue of compliance. Compliance with various parameters. You mentioned about KYC, but compliance with so many aspects. Again, let me not specify the details. So regulations are there, regulations are robust, and it's a situation where we are focused on the compliance not being there with the regulatory requirements. Thank you.

G

Gopika Gupta Kumar2:59:49

Thank you, sir. Question, sorry, first question, no, on the rate hike and the pause?

S

Shaktikanta Das2:59:56

I cannot say that. I think only time will tell. Only time will tell, you know, when something like that will happen. So thank you.

Y

Yogesh3:00:03

Sir, last few questions we will take. Shesh.

S

Shesh3:00:12

Namaste, sir. Thank you. Namaste, sir. Regarding the payment system, financial system, non-banking finance companies, overall parameters, system or individual level parameters are strong, or financial system growth sound? As a supervisor, regulated entities, supervision, guidelines, customer interest, depositors' interest, overall financial system, financial stability, or financial system custodian, Reserve Bank. Thank you.

Y

Yogesh3:03:42

Yeah, sir. Pratigya from Informous.

S

Shaktikanta Das3:03:44

Yeah.

Y

Yogesh3:03:45

Sir, Pratigya from Informous.

S

Shaktikanta Das3:03:46

Yeah, yeah, yeah, go ahead.

P

Pratigya3:03:48

Sir, my question is regarding the Paytm Payments Bank. Sir, you have said that you will issue an FAQ next week. But sir, what about the customers who are in a state of panic right now? They are not able to understand what to do. So, sir, what is your message to them? And sir, what about the merchants? They are also in a state of panic. So, sir, what is your message to them? And sir, what about the employees of Paytm Payments Bank? They are also in a state of panic. So, sir, what is your message to them? Thank you, sir.

H

Host3:03:47

Media and then Anika from Hindu Business Line. Two questions, last two questions.

A

Anika3:03:53

Good afternoon, Governor. Public debt has been high for three years now because of COVID spending by governments across the world. So what risks does RBI specifically now to raise this as a risk factor, and what are the spillover risks for this for India?

S

Shaktikanta Das3:04:14

You see, I was raising it in a global context, not in the context of India. The India part of the information I have given just by way of information, but my reply was in the global context. You know, you see the footnotes of my monetary policy statement, all the supporting data is given. By the end of this decade, global debt to GDP of advanced economies all put together is expected to exceed 100%. And in future, very surprisingly, you will notice that the debt to GDP of the advanced economies are actually much higher than the debt to GDP levels of the emerging market economies. Or fiscal deficit, advanced economies, deficit, reserve currency, money, you know, you know what you call as, you know, like creating new money, printing notes. So therefore, these are kind of things, you know, if the debt has to be sustainable for the long-term stability of the global financial system. So therefore, I have raised this as an issue which can create a future, which can become a future source of stress to the global financial system. So far as India is concerned, you please again look at my statement, I provide the data in the footnote. The IMF fiscal monitor gives out the data for India. The debt to GDP for India had gone up to 88%, general government, states and center, had gone up to 88% during the COVID year of 2020 because of the various fiscal measures which were undertaken. And then, by 2028, it's likely to, it has already come around about 81% or so. By 2028, according to the IMF fiscal monitor, it is expected to be around 80% or so. So that is the path which I just mentioned by way of information.

H

Host3:06:39

Thank you, sir. Anika, last.

A

Anika3:06:45

Hi, sir. Good afternoon. So this is not about Paytm but about UPI. Basically, there were talks about restricting, capping the market share of each app in terms of the UPI transaction volume share. We've seen the deadline was extended and the market share has only gone up for these platforms. Now that we're seeing the Paytm migration happen to some of these platforms like Google Pay and PhonePe, their market share is only increasing. Is there a concern regarding, say, over-reliance on a few specific platforms? And does that raise the risk of them becoming too big? And could the RBI then look at a structure of systemically important PA entities or something like that? And because I'm the last person, just one small clarification. You mentioned the overnight two VRRs in the day, two VRRs. Is there a specific amount or range that the RBI has in mind that you would prefer that banks not park their funds beyond that in SDF?

S

Shaktikanta Das3:07:40

I think DG Rabi Shankar followed by DG Michael Patra. Two questions, but you said last person, so the last mile in the queue should always have priority. So last person, so I think DG Rabi Shankar followed by Michael Patra.

R

Rishankar3:07:57

Yes, since it's the last question, I'll keep it very short. The limit is from the point of view of, you know, diffusion of risk in case, you know, some entity doesn't become available for whatever reason at any point in time. But to take it to too big to fail sort of is probably not appropriate here because they are just third-party app providers. The limit of 30%, funds don't go through them, so the system is not threatened except that there could be a temporary inconvenience in terms of shifting over to an additional system. Having said that, it will be for the market to decide. The market forces have to play out such that this percentage is more evenly decided. We will not be interfering into them in the market process to ensure that the 30% or something is, in any case, it's an NPCI requirement. We'll have more players to come in. Hopefully, with technology, we'll get some more players and that percentage can be maintained. We have time till the end of this year anyway.

M

Michael Patra3:09:03

Yeah, we don't have any preconceived limit on how much they put in SDF. The SDF by its very nature is a standing facility and it's at the discretion of market participants as to how much they want to use. As to why we did two VRRs during the day, we assess market conditions and bidding behavior. And we, in the first auction, we realized that there were bids which were higher than the amount we offered. We offered 50, we got a lot more. So we thought that probably they would like to park more in the VRR which is more remunerative than the SDF. And so we did the second.

S

Swaminathan3:09:46

Yeah, I think DG Swaminathan wants to just, just one clarification on, because the question came around the UPI apps. See, this particular action is against the payment bank. It's not to do with, not to be confused with the payment app which is done right. That's okay, we will clarify through the FAQs. But just to clarify in terms of your question, just as a supplemental information, that as an app is not impacted by this action.

H

Host3:10:17

Hello everyone and welcome to this post-policy press conference. With us today we have respected Governor Shri Shaktikanta Das. I had said last time, just say Governor. Okay, sir. We have Shri Shaktikanta Das, Governor, Reserve Bank of India with us, along with Dr. Michael Patra, Shri M. Rajeshwar Rao, Shri T. Rabi Shankar, and Shri Swaminathan. Along with us also are our executive directors, Dr. O.P. Mall and Dr. Rajiv Ranjan, and my colleague from MPD and the Secretariat. So we have 22 media persons present here. And as is our want, we will first go with your opening remarks and then we'll go for the press conference. Over to you, sir.

S

Shaktikanta Das3:11:06

Thank you for being here. Good morning. You have already heard the statement. It's been uploaded also. I just, in the as a part of initial remarks, I would like to make nine points. First, domestic economic activity continues to be strong. We expect the real GDP to grow by 7% in the next financial year, 24-25. Second point, CPI inflation is moderating with intermittent interruptions and spikes. We have to remain vigilant about the incoming data and the outlook. Our endeavor to achieve 4% inflation on a durable basis has to continue. Third, globally, markets are front-running central banks in anticipation of policy pivots, but central banks remain apprehensive and wait for a more durable alignment of inflation with the targets. Four, liquidity will be actively managed by the Reserve Bank. Five, our multi-pronged, proactive, and calibrated policies have worked well to maintain and strengthen macroeconomic and financial stability. Six, systemic, sectoral, and institution-specific signs of stress are being proactively monitored and acted upon wherever necessary. Seven, let me reiterate that good governance, robust risk management, sound compliance culture, and protection of customers' interest are the hallmarks of the Reserve Bank's approach to the safety and stability of the financial system and individual financial institutions. Regulated entities must accord the highest priority to these aspects. These are the seventh point. The eighth point is the external sector of the economy remains resilient. The current account deficit is expected to be eminently manageable. Nine, the exchange rate of the Indian rupee has remained stable. Thank you.

H

Host3:13:50

Thank you, sir, for those opening remarks. And may I request all of you to wait for your turn to be called and request also to stick to one question. And if we have time, we'll go for the other or second or third question. So I'll begin by inviting L. Venkatesh from CNBC TV18.

L

L. Venkatesh3:14:11

Thank you, Governor. Thank you, Yogesh. Well, sir, I'm a little confused about whether you are distinguishing between liquidity and your stance. You have mentioned in three places that you're not, that the entire rate hike has not been fully transmitted. So I assume you want more hike transmitted. But separately, you have said that you will manage liquidity, para 21, in great detail, that you will manage liquidity with a bunch of instruments. Should we understand therefore that unlike the majority of the last five months when call was closer to 6.75, you will be more like you were in the last one week where you will give long-term liquidity through VRR and adjust for short-term, which is keep call rate closer to 6.5? Is that what you are trying to say, that I'll do that but I want more interest rate hikes to happen? And sir, since you have dwelt on this good governance, I must add, are you trying to say that you will not give Paytm any further timeline to set them right? Does Feb 29 stand? Is that what we...

S

Shaktikanta Das3:15:27

Two questions actually. Two questions, so please ask one question each. The first part of the question I would request Deputy Governor Michael Patra to reply. The second part I would request Deputy Governor Swaminathan to reply. Go ahead.

M

Michael Patra3:15:43

As Governor has clarified in his statement, the stance is all about the future course of policy rates. Liquidity is endogenous to the rate. When the rate is the chief instrument of monetary policy, liquidity follows the rate. You have to move liquidity to achieve a certain rate. So our objective is to keep the repo rate, keep the weighted average call rate around the repo rate. But there are times when there are temporary drivers of autonomous liquidity, like government balances which go through tectonic shifts, and market participants take time to adjust. Even they are unsure about the future direction of this. So that is why sometimes the call rate goes to where it went. But you saw that we were nimble in our actions and we brought it down to the repo rate. That is our endeavor.

L

L. Venkatesh3:16:37

You were nimble after five months. So I'm asking, will you be like the previous five months? Will you be like the previous last five days?

M

Michael Patra3:16:45

No, that is not correct. Because at the time when the rates were up, we allowed market participants to take what liquidity they wanted from us through our standing facilities. And we did the main operation every 14th day. So it was not that we let it go, but it was the market participants still, you saw the reactions of the VRR, they were unwilling to let go because they were unsure about how balances will move.

S

Swaminathan3:17:15

Yeah, see, as you know, as a matter of policy, we don't comment on individual entity or actions that we initiate in such cases. But that anyway, since this question is on the uppermost of mind of most of you, I think I would like to say two-three things essentially to set the context. What, you know, while we don't want to be discussing the individual details here because that will not be proper in terms of context, as you all know, that this is a supervisory action on a regulated entity for a persistent non-compliance. Second, such supervisory actions are invariably preceded by months and at times years of bilateral engagement where we don't, not even pointing out the deficiencies, but also provide more than adequate time for them to take corrective action. Third, of course, is in terms of as a regulator, it's incumbent upon us to protect the interest of the ultimate consumer and thereby protecting the stability of the financial system. So these actions have to be seen in that particular context. Coming to the second part of your question, what lies ahead, you know, as part of MPC, we don't give a forecast in these matters. So I think you will have to wait. And of course, we have been, we have been getting feedback, we'll work on, and as a responsible regulator, suitable steps will be taken to ensure that the customer inconvenience, if any, is minimized. So we will take care. I think with that we can give a rest to this question and then move on to MPC is my request.

H

Host3:18:50

Thank you. Thank you, sir. I'll move on to Mr. Gaurang Rangan from Economic Times.

G

Gaurang Rangan3:18:57

So thank you, sir. Good afternoon, Governor. For the rate decision, rather, the status quo, you specifically mention that the transmission of 250 basis points is still continuing. So the bankers say that the deposit rates have already gone up by 250 basis points and the lending rates have also gone up. So what in your mind is the actual transmission that has not happened and how much is that? And what is the benchmark that you're looking at to conclude that the transmission has happened? Thank you.

S

Shaktikanta Das3:19:32

Okay, again, you know, like the previous questions, I would request, I think DG Swaminathan supplemented by DG Michael Patra to reply to that question. Let there be wider participation. I don't want to monopolize all the answers. So, yeah, go ahead.

S

Swaminathan3:19:48

Yeah, see, as far as the transmission in a hiking phase, as we have always seen in the past, the rates on deposit side, the resets much faster and they get passed on. And as we have seen, repo rates have almost played out. While on the lending side, it does take time to pass for two critical reasons in our assessment. There are two major reasons. One is that, you know, the proportion of loans that are benchmarked externally, what we call EBLR, EBLR-linked loans, is still less than 50%. So where the transmission could be instant is only where the EBLR comes into play. In case of other instruments, other benchmarks like MCLR or base rates or fixed rate loans, it does take time to transmit. So that is the precise reason why we still see that transmission is fully not in place. The second, also in a hiking phase, we have seen banks in their anxiety to maintain their market share in the incremental credit also adjust their margins so as not to, you know, lose their market share in the incremental credit. So that also impedes a complete transmission in terms of the effective interest rate. So I hope, as we understood from the context of these two parameters. Thank you.

M

Michael Patra3:21:08

Anything you would like to supplement? No.

H

Host3:21:11

Yeah, I'll move on to Mr. Anun Mishra from ET now.

A

Anun Mishra3:21:17

Thank you. I would like to ask a question once again on the Paytm issue. We understand there has been a meeting with Paytm officials and Bank of India, and what transpired in that, I know, I don't want to know the exact details, but from the financial system point of view, the company has been claiming that they have taken all the remedial measures and all the efforts are being made so that there is minimal or no impact of customers. So from that point of view, is there any remedial measure which has been suggested by Reserve Bank of India?

S

Swaminathan3:21:55

I think this is again a matter of bilateral discussion, so I don't think that'll be proper for us to discuss it in this forum. So as I said, discussing on individual entities will not be very proper, giving granular details in this matter. So we are seized of the issue and as we take steps, we will keep the media and public certainly informed. Thank you.

S

Shaktikanta Das3:22:21

You see, as the Deputy Governor has already commented, I mean, sufficient, I'm again saying in a general sense, not specific to this case, we give sufficient time, you know, we give sufficient time to every regulated entity, every entity that is supervised by the Reserve Bank to comply with the required, the regulatory requirements. We give sufficient time and sometimes, as he pointed out, sometimes it may even look more than sufficient time. And we would not like to act, you know, we are a responsible regulator, we are a responsible supervisor. If everything had been complied, I'm talking about in a general sense, why should we act? I mean, after all, we have a responsibility, we are, it's a responsible institution, RBI. So that's how it is. Yeah, thank you.

H

Host3:23:18

Sir, all...

Thank you, sir. Anika from Business Today.

A

Anika3:24:15

Good afternoon, sir. I'll also make an attempt on the Paytm issue. You know, DG Swaminathan talked about, you know, this persistent non-compliance and he also said in such cases, you know, months and years of, you know, bilateral engagement. You know, my question is why did RBI not consider, you know, appointing a director on the board of Paytm when you knew about this persistent non-compliance issues?

S

Swaminathan3:24:39

See, as a regulator, we have various tools in the kitty and it's not necessary that every single tool will be deployed in every single situation. We make our own assessment to the scale and proportionate of the issue as well as the tool that we will have to use at different points in time. So one size fits all kind of solution may not work in such situations. So, you know, I would like to stop there rather than trying to elaborate on that. We may use certain tools, may not use certain tools, but it is after a due consideration that we do. Thank you.

H

Host3:25:16

Thank you, sir. I'll move on to Mr. Anil Roy from Bloomberg.

A

Anil Roy3:25:19

Thank you, sir. Sir, the budget was non-inflationary and the government really brought down the fiscal deficit, etc., and the bond yields have fallen. So the government probably wants interest rates to come down, but RBI probably is keeping interest rates high. You're saying the transmission is not complete, etc. Is there a lack of coordination, sir?

S

Shaktikanta Das3:25:44

No, I mean, has the government said anywhere that they want the interest rates to be brought down? So therefore, it's a, I mean, it's a very speculative proposition, so I cannot reply to that question. Thank you.

H

Host3:25:56

Thank you, sir. I'll invite Shama Mishra from Dainik Bhaskar.

S

Shama Mishra3:26:00

Good afternoon, sir. So it's again on Paytm. The situation as we describe it, that Paytm is known as one of the pioneers of fintech coming to this situation, do you see this as a worrisome situation for the entire sector? And what lesson would you like to highlight for any similar future companies?

S

Shaktikanta Das3:26:24

Now let me sort of provide some broad guidance on this Paytm issue because, I mean, there have been at least four or five questions till now and there could be more, many more questions. So let me put the entire thing, you know, let me put the record straight. Now you said that worry about the system and all that, there is no worry about the system at the moment. Here we are talking about a specific institution, a specific payment bank. As the Deputy Governor has already, Deputy Governor Swaminathan has already explained, he has provided several details. Similarly, I also don't want to comment on a specific case, but in this context, I would like to make some general observations, not with specific reference to Paytm as such, but some general observations which includes all our regulated entities. So all our regulated entities, does not exclude Paytm, it is applicable to all the regulated entities. And in fact, this, which one, focus on, no, no, no, no, the advice is the camera should not focus on this because I have written so many things, these are private parts, so the cameras can focus perhaps on my face. So but let me, thank you, I think that's very agile on his part. So let me focus on some, make some general points and I would like to, you know, make some about six or seven points. Now first is that over the last few years, as all of you are aware, we have significantly deepened our supervisory systems, approach, and methods. Number two, our emphasis is always on, as the Deputy Governor has pointed out, our emphasis is always on bilateral engagement with the regulated entity. And we, in that engagement, we give focus on and we are completely focused on nudging the regulated entity to take corrective action. Let me rephrase it, our emphasis is always on bilateral engagement with the regulated entities with focus on nudging them for corrective action and sufficient time is given for undertaking such corrective action. The third point, when such constructive engagement which we undertake, when that does not work, so when such constructive engagement does not work or when the regulated entity does not take effective action, we go for imposing supervisory or business restrictions. Number four, such restrictions which we impose are always proportionate to the gravity of the situation. Please take note that such restrictions are proportionate to the gravity of the situation. Number five, all our actions, being a responsible regulator, being a responsible supervisor, all our actions are in the best interest of systemic stability and protection of depositors' or customers' interest. These aspects cannot be compromised. Individual entities should be mindful of these aspects for their long-term success. Number six, over the last few days, we have received a lot of queries, clarifications from various quarters including, you know, members of the public. You have raised a few questions today. So we have noted all these questions and clarifications which have been sought from us and based on that we will be issuing a FAQ sometime next week. So that should address all these questions and clarifications which are being raised by you and which have been raised in the public domain and raised bilaterally with us by various, from various quarters. Number seven, finally and emphatically, let me stress and let me emphatically state that the Reserve Bank is and will continue to encourage and support innovation and technology in the financial sector. Let there not be any doubt about Reserve Bank's commitment to promote fintech, to promote innovation, to promote technology in the financial system. Thank you.

H

Host3:31:45

Thank you, sir. I will move on to Mr. D.H. Krishan from Moneycontrol.

D

D.H. Krishan3:31:49

Thank you, Yogesh. Thank you, Governor. I have a very short related question, sir. You know, in your remarks, you stressed about the good governance and sound compliance, and this is not something that you're speaking for the first time. You have been emphasizing this part and the role of the boards in the regulated entities is extremely critical, as you have pointed out. What is your view on the role of the Paytm board? Because, you know, it didn't happen all of a sudden. Since 2021, RBI has been alerting the regulatory breaches, and as per the process, the RBI on-site inspection report is passed to the ACB and the board for corrective actions. So probably, you know, if they had acted on time, things would not have worsened to this level. So have you, why is the regulator silent on the role of the board while the reasons for this action is quite evident?

S

Shaktikanta Das3:32:42

You see, typically we do not share such granular information. We have been engaged with the institution, with the entity for quite some time. And within that, with whom we interacted and how it was, you know, such granular details, it will not be appropriate on our part to share those details.

H

Host3:33:06

Thank you, sir. I'll move on to Mr. Vishnath from NDTV Profit.

V

Vishnath3:33:09

Hi, sir. Thank you so much, Yogesh. I'll give a little respite and move to another topic. But on CBDC, you're talking about introducing additional programmability...

S

Shaktikanta Das3:33:25

No, we don't need any respite. The topic, go ahead. But the point is, you know, the same question is coming up and also in as much as we are issuing a FAQ, so I would request if you have still some clarification or something on which you want a clarity, I think you can send it bilaterally to us directly, you can mail it to us. We will see to what extent we can address that question.

V

Vishnath3:33:49

Yeah, sure. My question is with regard to the additional programmability that you're proposing to bring in with respect to the CBDC pilot. The question has been there since the beginning when this topic was, DG Rabi Shankar had introduced. Doesn't this go against the fungibility of money if the intent is to make CBDC the equivalent of paper currency? And if you introduce specific restrictions on usage, does the fungibility factor not go opposite to that?

S

Shaktikanta Das3:34:15

No, we are not imposing a restriction. I think we are making it more flexible. But let DG Rabi Shankar take that question.

R

Rishankar3:34:23

Thank you. You know, shifting to me. So, you know, I'll give a, you know, more formal answer, I think, but the best way to think about it is when a family puts some currency notes in a package to be used for, let's say, groceries during the month, doesn't mean that the fungibility of the currency is lost. It's just that until that spending happens, it can be used for no other purpose. I'm just giving you as an example to be able to, you know, think on what we mean by fungibility, what we mean by programmability. When you do programmability, for a moment, fungibility is on hold. We have to realize that it's a facility that we are providing the currency. Again, by way of an example, let's suppose that a school has given some money to a student who won a prize to buy books in a particular shop. So the student can only use this money to buy books in that shop. That's intended. Supposing the student goes and buys that book, he cannot use it for any other purpose. As soon as the book is purchased and the currency goes to the bookshop owner, it again becomes fungible. So it's only for that period that fungibility is limited. Supposing he doesn't spend it, it goes back to the school, fungibility is restored. So it is a way of controlling expenditure that you do not get unless it's digital and that you do not get unless it's a token. It's a facility that is there. We'll use and the facility will typically be agreed by both the recipient as well as the person who puts that condition. So no, to give a very short answer, it doesn't militate against the programmability, doesn't militate against fungibility. It's only a specific use binding.

S

Shaktikanta Das3:36:18

Thank you. And to extend that reply further, imagine a situation where, you know, later on when CBDC is fully implemented at a later date, if the government wants to give some cash support to certain individuals for a specific purpose, programmability will be useful in such situations. So that the money, the cash which is going from government to such persons can be used for specific purposes. So therefore, it's typical for every, you know, it is typical for every household in the beginning of the month to do their own budget and set aside money, you know, one envelope for school fees, one envelope for electricity bills, and it happens. It's a common thing which happens in large number of households. Yeah, next.

H

Host3:37:16

Thank you, sir. I will request Manojit Saha from Business Standard.

M

Manojit Saha3:37:19

Thank you, sir. So I again go back to the para 21 on liquidity. So you said stance is with respect to rates and incomplete transmission. Does that mean that you're creating elbow room to do liquidity operations, OMO purchase to infuse liquidity? Because March is going to be very tight and then, you know, then such liquidity operation will not be seen out of sync with the stance. So you're separating the stance from liquidity management and you're saying it is only on rates. Does that give you elbow room to do OMO purchase when liquidity will be very tight in March?

S

Shaktikanta Das3:38:03

You see, what we have attempted to do today is to, you know, clarify and clearly state that do not read the stance of monetary policy in terms of excess liquidity prevailing or deficit liquidity prevailing. That's not the point. Liquidity plays a secondary role to support monetary policy transmission. That is, there is a monetary policy, there is a repo rate, liquidity situation in the market. I think that is what the Deputy Governor said in the beginning itself. You clarified that we try to keep the liquidity at a level wherein the overnight call rate, which is the operating target of monetary policy, remains around the repo rate. In the first part of this year, due to various exogenous factors, there was lot of liquidity. So we conducted, you know, we conducted sort of repo auctions, variable rate repo auctions. But market took time to adjust and market also, banks, individual banks make their own analysis of the liquidity situation and that analysis by the banks also varies within a day. You look at yesterday, yesterday or was it day before, we did two VRR auctions. The response to the first one was very low, I think some 4,000 crores. But then we, same day, we did one more and we got a response of 27,000 crores. So between morning auction when the banks offered 4,000 crores and to a subsequent auction in the afternoon, the banks offered 27,000 crores. So therefore, due to various autonomous factors, liquidity situation has been fluctuating in the market. Banks make their own assessments. Banks also take their own decisions. Markets and banks, meaning the banks and the markets, take time to adjust to the evolving liquidity situation. So far as the RBI is concerned, we will remain active, we will remain nimble in our liquidity management. What instruments we will utilize, that will depend on the prevailing situation which will come up from time to time. I cannot say that we will use this and not use this. We have several instruments at our disposal. Depending on situation, we will use the most appropriate instrument. Also, let me ask one thing very straight. Other people also, so I'll move on to Mr. Brajesh Kumar from Zee Business News.

B

Brajesh Kumar3:41:09

Hidden cost loan, hidden processing, uniform format, hidden location, term, specified charges, borrowing, borrowing, I mean experience, and, and, micro, digital lending, already simplified, key fact statement, one, annualized, all-inclusive interest rate, interest rate. You know, let us be very clear, the bank's terms and conditions are very transparent in the sense that all information is given. But experience, term sheet, statement, purely in customers' interest. And I'm sure banks will encourage it because the banks also are interested in, the banks are long-term players, so they are not, you know, short-term operators. No second question. Most important terms and conditions to give greater transparency.

H

Host3:44:32

Thank you, Dhananjay sir. P. Shukla from, you know, Financial Express.

P

P. Shukla3:44:40

Good afternoon, Governor sir, DGs, Yogesh sir. Just taking you back to where we started. DG Swaminathan said that there are various tools in kitty with regard to Paytm, how the future course of action will be taken. Sir, very specifically, banks are becoming very hesitant to actually partner with this bank, Paytm Payments Bank, for shifting their customers and their merchants in one go. They are saying that we need regulatory approval for that. So will you provide that? And will you allow the sale of their wallet to other potential payments banks?

S

Swaminathan3:45:18

See, it'll be very difficult to provide any hypothetical answers at this point in time. So as I said, that there's still time that is provided for customers to continue to access the services that is provided. So during this period, we will see what else needs to be done. And keeping, as Governor also said, that we keep the customer in the center of what needs to be done. So we will take appropriate steps. The second part of your question, in terms of what the other banks will have to do, each of them, it's a business decision. They have got to carry out required due diligence as per their laid-down board-approved policies. And I'm sure that they will carry out that if they have got to do a partnership. So that's something which we will not comment at this point in time. But what tool and shape it will take is not something which we would like to speculate at this point in time. You may wait for the FAQs which will give you more clarity.

P

P. Shukla3:46:14

Sorry, so banks don't need regulatory approval for taking on board the Paytm customer?

S

Swaminathan3:46:19

It's very specific to a particular item. I think it's better for you to wait for the FAQs. Please be patient, let the FAQ come next week.

H

Host3:46:26

Okay, thank you, sir. I'll move on to Siti Bat from Reuters.

S

Siti Bat3:46:33

Thank you, sir. Governor, today you've said that next year's growth is projected at 7%. Nominal GDP growth, as per the budget, is projected at 10.5%. I mean, I don't know if my maths is wrong, but effectively that would mean inflation is at around 3.5% next year. Is that right? Are you being a bit too optimistic about growth, or is the government underplaying growth and being very modest in their projections? Thank you.

S

Shaktikanta Das3:46:57

So I think you take that question because he likes to play these balls. No, I will not venture to answer for the government. But my understanding of this is that what goes into the nominal GDP is not CPI inflation, it's the GDP deflator. And GDP deflator is always a weighted combination of CPI and WPI. Now the WPI has been in deflation for most part of this year and it's just emerging out of deflation. So that must be the reason.

H

Host3:47:27

Thank you, sir. I'll move on to Mr. Mayur Shetty from Times of India.

M

Mayur Shetty3:47:33

Governor, in the development measures, you spoke about reviewing the AePS, and some banks have come out with warnings on how fingerprints can be cloned using silicon. Is that what's caused this thing? And also, since OTP is also being reviewed, does it mean that the traditional forms of KYC are the best option for regulated entities?

S

Shaktikanta Das3:48:03

No, OTP is not being reviewed. What I'm saying is that over the years, it so happens that OTP has become the most popular and commonly used AFA, you know, that additional factor of authentication. But with the movement of time, various other technologies and methods have come up. So we want to just tell the players in the field that there are other methods also and please, and RBI will be agnostic to them as long as they are sound methods. The banks and institutions are free to adopt them. But I think let DG Rabi Shankar take the other part of the question with regard to the AePS.

R

Rishankar3:48:49

Yeah, you sort of gave the answer in your question itself. It's basically to ensure that since this is being used, you know, in rural and such areas a lot, it's important that the safety of these transactions is ensured. Now with the passage of time, as in the case of additional factor of authentication, we can use various technologies to do it. So that is essentially the position here. All touchpoint operators will go through a standardized, safe, and secure onboarding process. We can add, you know, we possibly can, as we have indicated, we can also add other factors into it. For example, the switch-on has to be done by the customer instead of it being pre-available on the system, or it can have geo-limits beyond which it cannot operate. Whatever is required for the customers, the idea is that as Reserve Bank has always been placing a lot of emphasis on the security of digital transactions, which we believe is key to ensuring customer adoption, especially customers who are not savvy digitally. But this is an effort in that direction to improve the security of transactions.

H

Host3:50:05

Thank you, sir. I'll move on to Mr. Hesh Yas from Indian Express.

H

Hesh Yas3:50:07

Sir, hi, sir. Good afternoon, sir. There is an expectation that the stance would be changed to neutral. Sir, what are the preconditions for stance to become neutral?

S

Shaktikanta Das3:50:23

I cannot give a forward guidance on that. I think when, you know, when we do the, when such a thing happens, we will explain, you know, how it is. But you see, I'll tell you, the situation, evolving situation continues to be very volatile and uncertain. You look at the commentaries coming out from, you know, the central banks, mostly of advanced countries. Sometimes, you know, they appear to be giving a forward guidance in one particular direction. Sometimes the market interprets the next guidance to be in a different direction. So therefore, at the moment, we are not giving any forward guidance with regard to stance or rate. When we will, you know, market is, there's a talk of when the central banks world over will cut rates. So, and as I have said, markets are, you know, overshooting, you know, running ahead of the central banks. So I think preconditions, I will not be able to specify unless Dr. Michael Patra wants to comment anything on that. So because, you know, these are very volatile times and so therefore it's better to wait. And when something like that happens, we will explain it appropriately.

H

Host3:51:47

Thank you, sir. I'll move on to Ms. Gopika Gupta Kumar from The Mint.

G

Gopika Gupta Kumar3:51:52

Thank you, Yogesh sir. Good afternoon, Governor. Considering that your inflation forecast for next year is at 4.5% and GDP at 7%, and you're saying that RBI needs to be vigilant in the last mile of disinflation, does it rule out a rate cut in FY25? And secondly, on the Paytm issue, the what is the larger issue? Is it the KYC or is it something related to the ownership or interlinkage between a regulated and a non-regulated entity? Because if it is KYC, then does RBI need to relook at the minimum regulations around the minimum KYC accounts? That is my second question.

S

Shaktikanta Das3:52:32

No, you know, again, an institution or an entity-specific details, we would not like to spell out. And let me leave it at that because I cannot really share, it's a bilateral engagement between the RBI and the regulated entity. The regulations are there in their place. The regulations are robust. There is no need for, it is not a case of where there was a regulatory deficiency or there was a regulatory correction required. It's an issue of compliance. Compliance with various parameters. You mentioned about KYC, but compliance with so many, so many aspects. Again, let me not specify the details. So regulations are there, regulations are robust, and it's a question of, it's a situation where we are focused on the compliance not being there with the regulatory requirements.

G

Gopika Gupta Kumar3:53:34

Thank you, sir. The first question, sorry, first question?

S

Shaktikanta Das3:53:39

No, on the rate hike and the pause, I cannot say that. I think only time will tell. Only time will tell, you know, when something like that will happen. So thank you, sir.

H

Host3:53:49

Last few questions we will take.

S

Shesh3:53:57

Shesh. Namaste, sir. Thank you. Namaste, sir. Sir, overall financial system, non-banking finance company, NBFC, performance, overall parameters, systemic level or individual level parameters are strong or India's financial system as a supervised entity, bank, NBFC, financial institution, deviations, effective interest, customer interest, depositors' interest, overall financial system, financial stability or financial system. Thank you, sir.

H

Host3:57:28

Priya from Informous Media and then Anika from Hindu Business Line. Two questions, last two questions.

P

Priya3:57:37

Good afternoon, Governor. Public debt has been high for three years now because of COVID spending by governments across the world. So what risks does RBI specifically now to raise this as a risk factor, and what are the spillover risks for this for India?

S

Shaktikanta Das3:57:57

You see, I was raising it in a global context, not in the context of India. The India part of the information I have given just by way of information, but my reply was in the global context. You know, you see the footnotes of my monetary policy statement, all the supporting data is given. By the end of this decade, global debt to GDP of advanced economies all put together is expected to exceed 100%. And in future, very surprisingly, you will notice that the debt to GDP of the advanced economies are actually much higher than the debt to GDP levels of the emerging market economies. Or fiscal deficit, advanced economies, deficit, reserve currency, money, you know, you know what you call as, you know, like creating new money, printing notes. So therefore, these are kind of things, you know, if the debt has to be sustainable for the long-term stability of the global financial system. So therefore, I have raised this as an issue which can create a future, which can become a future source of stress to the global financial system. So far as India is concerned, you please again look at my statement, I provide the data in the footnote. The IMF fiscal monitor gives out the data for India. The debt to GDP for India had gone up to 88%, general government, states and center, had gone up to 88% during the COVID year of 2020 because of the various fiscal measures which were undertaken. And then, by 2028, it's likely to, it has already come around about 81% or so. By 2028, according to the IMF fiscal monitor, it is expected to be around 80% or so. So that is the path which I just mentioned by way of information.

H

Host4:00:23

Thank you, sir. Anika, last.

A

Anika4:00:28

Hi, sir. Good afternoon. Sir, this is not about Paytm but about UPI. Basically, there were talks about restricting, capping the market share of each app in terms of the UPI transaction volume share. We've seen the deadline was extended and the market share has only gone up for these platforms. Now that we're seeing the Paytm migration happen to some of these platforms like Google Pay and PhonePe, their market share is only increasing. Is there a concern regarding, say, over-reliance on a few specific platforms? And does that raise the risk of them becoming too big? And could the RBI then look at a structure of systemically important PA entities or something like that? And because I'm the last person, just one small clarification. You mentioned the overnight two VRRs in the day, two VRRs. Is there a specific amount or range that the RBI has in mind that you would prefer that banks not park their funds beyond that in SDF?

S

Shaktikanta Das4:01:24

I think DG Rabi Shankar followed by DG Michael Patra. Two questions, but you said last person, so the last mile in the queue should always have priority. So last person, so I think DG Rabi Shankar followed by Michael Patra.

R

Rishankar4:01:41

Yes, since it's the last question, I'll keep it very short. The limit is from the point of view of, you know, diffusion of risk in case, you know, some entity doesn't become available for whatever reason at any point in time. But to take it to too big to fail sort of is probably not appropriate here because they are just third-party app providers. The limit of 30%, funds don't go through them, so the system is not threatened except that there could be a temporary inconvenience in terms of shifting over to an additional system. Having said that, it will be for the market to decide. The market forces have to play out such that this percentage is more evenly decided. We will not be interfering into them in the market process to ensure that the 30% or something is, in any case, it's an NPCI requirement. We'll have more players to come in. Hopefully, with technology, we'll get some more players and that percentage can be maintained. We have time till the end of this year anyway.

M

Michael Patra4:02:47

Yeah, we don't have any preconceived limit on how much they put in SDF. The SDF by its very nature is a standing facility and it's at the discretion of market participants as to how much they want to use. As to why we did two VRRs during the day, we assess market conditions and bidding behavior. And we, in the first auction, we realized that there were bids which were higher than the amount we offered. We offered 50, we got a lot more. So we thought that probably they would like to park more in the VRR which is more remunerative than the SDF. And so we did the second.

S

Swaminathan4:03:30

Yeah, I think DG Swaminathan wants to just, just one clarification on, because the question came around the UPI apps. See, this particular action is against the payment bank. It's not to do with, not to be confused with the payment app which is done right. That's okay, we will clarify through the FAQs. But just to clarify in terms of your question, just as a supplemental information, that as an app is not impacted by this action.

This particular action is against the payment bank. It's not to be confused with the payment app. We will clarify through the FAQs, but just to clarify in terms of your question, the UPI app is not impacted by this action.

Y

Yogesh4:04:01

Hello everyone and welcome to this post-policy press conference. With us today we have respected Governor Shri Shaktikanta Das. I had said last time, just say Governor. Okay sir, we have Shri Shaktikanta Das, Governor, Reserve Bank of India with us, along with Dr. Michael Patra, Shri M. Rajeshwar Rao, Shri T. Rabi Shankar, and Shri Swaminathan. Along with us also are our executive directors, Dr. O.P. Mall and Dr. Rajiv Ranjan, and my colleague from MPD and the Secretariat. Sir, we have 22 media persons present here, and as is our want, we will first go with your opening remarks and then we'll go for the press conference. Over to you.

S

Shaktikanta Das4:04:50

Thank you for being here. Good morning. You have already heard the statement; it's been uploaded. As a part of initial remarks, I would like to make nine points. First, domestic economic activity continues to be strong. We expect the real GDP to grow by 7% in the next financial year, 2024-25. Second, CPI inflation is moderating with intermittent interruptions and spikes. We have to remain vigilant about the incoming data and the outlook. Our endeavor to achieve 4% inflation on a durable basis has to continue. Third, globally, markets are front-running central banks in anticipation of policy pivots, but central banks remain apprehensive and await a more durable alignment of inflation with the targets. Four, liquidity will be actively managed by the Reserve Bank. Five, our multi-pronged, proactive, and calibrated policies have worked well to maintain and strengthen macroeconomic and financial stability. Six, systemic, sectoral, and institution-specific signs of stress are being proactively monitored and acted upon wherever necessary. Seven, let me reiterate that good governance, robust risk management, sound compliance culture, and protection of customers' interest are the hallmarks of the Reserve Bank's approach to the safety and stability of the financial system and individual financial institutions. Regulated entities must accord the highest priority to these aspects. This is the seventh point. The eighth point is the external sector of the economy remains resilient. The current account deficit is expected to be eminently manageable. Nine, the exchange rate of the Indian rupee has remained stable. Thank you.

Y

Yogesh4:07:34

Thank you, sir, for those opening remarks. May I request all of you to wait for your turn to be called and request also to stick to one question. If we have time, we'll go for the second or third question. So I'll begin by inviting L. Venkatesh from CNBC TV18.

L

L. Venkatesh4:07:55

Thank you, Governor. Thank you, Yogesh. Well, sir, I'm a little confused about whether you are distinguishing between liquidity and your stance. You have mentioned in three places that the entire rate hike has not been fully transmitted, so I assume you want more hike transmitted. But separately, you have said that you will manage liquidity in great detail with a bunch of instruments. Should we understand, therefore, that unlike the majority of the last five months when call was closer to 6.75, you will be more like you were in the last one week, where you will give long-term liquidity through variable rate repo and adjust for short-term, which is keep call rate closer to 6.5? Is that what you are trying to say? And sir, since you have dwelt twice on this good governance, I must add, are you trying to say that you will not give Paytm any further timeline to set them right? Does February 29 stand?

S

Shaktikanta Das4:09:08

There are two questions actually. Two questions, so please ask one question each. The first part of the question I would request Deputy Governor Michael Patra to reply. The second part I would request Deputy Governor Swaminathan to reply. Go ahead.

M

Michael Patra4:09:26

As Governor has clarified in his statement, the stance is all about the future course of policy rates. Liquidity is endogenous to the rate. When the rate is the chief instrument of monetary policy, liquidity follows the rate. You have to move liquidity to achieve a certain rate. So our objective is to keep the weighted average call rate around the repo rate. But there are times when there are temporary drivers of autonomous liquidity, like government balances, which go through tectonic shifts, and market participants take time to adjust. Even they are unsure about the future direction of this. So that is why sometimes the call rate goes to where it went. But you saw that we were nimble in our actions and we brought it down to the repo rate. That is our endeavor.

L

L. Venkatesh4:10:21

You were nimble after five months. So I'm asking, will you be like the previous five months, or will you be like the last five days?

M

Michael Patra4:10:27

No, that is not correct. Because at the time when the rates were up, we allowed market participants to take what liquidity they wanted from us through our standing facilities, and we did the main operation every 14th day. So it was not that we let it go, but it was the market participants. Still, you saw the reactions of the VRR; they were unwilling to let go because they're unsure about how balances will move.

S

Swaminathan4:10:58

As you know, as a monetary policy, we don't comment on individual entity or actions that we initiate in such cases. But anyway, since this question is on the uppermost of mind of most of you, I think I would like to say two or three things essentially to set the context. While we don't want to be discussing the individual details here because that will not be proper, in terms of context, as you all know, this is a supervisory action on a regulated entity for a persistent non-compliance. Second, such supervisory actions are invariably preceded by months and at times years of bilateral engagement, where we are not only pointing out the deficiencies but also provide more than adequate time for them to take corrective action. Third, of course, as a regulator, it's incumbent upon us to protect the interest of the ultimate consumer and thereby protecting the stability of the financial system. So these actions have to be seen in that particular context. Coming to the second part of your question, what lies ahead, as part of MPC, we don't give a forecast in these matters. So I think you will have to wait. And of course, we have been, what feedback we have been getting, we'll work on, and as a responsible regulator, suitable steps will be taken to ensure that customer inconvenience, if any, is minimized. So we will take care. I think with that, we can give a rest to this question and then move on to MPC is my request.

Y

Yogesh4:12:37

Thank you, sir. I'll move on to Mr. Gaurang Rangan from Economic Times.

G

Gaurang Rangan4:12:41

Thank you, sir. Good afternoon, Governor. For the rate decision, rather, the status quo, you specifically mentioned that the transmission of 250 basis points is still continuing. So the bankers say that the deposit rates have already gone up by 250 basis points and the lending rates have also gone up. So what in your mind is the actual transmission that has not happened, and how much is that? And what is the benchmark that you're looking at to conclude that the transmission has happened? Thank you.

S

Shaktikanta Das4:13:16

Again, you know, like the previous questions, I would request, I think, DG Swaminathan supplemented by DG Michael Patra to reply to that question. Let there be wider participation. I don't want to monopolize all the answers. So yeah, go ahead.

S

Swaminathan4:13:30

As far as the transmission in a hiking phase, as we have always seen in the past, the rates on the deposit side reset much faster and they get passed on. And as we have seen, repo rate hikes have almost played out. While on the lending side, it does take time to pass for two critical reasons in our assessment. There are two major reasons. One is that the proportion of loans that are benchmarked externally, what we call EBLR-linked loans, is still less than 50%. So where the transmission could be instant is only where the EBLR comes into play. In case of other instruments, other benchmarks like MCLR or base rates or fixed-rate loans, it does take time to transmit. So that is the precise reason why we still see that transmission is fully not in place. The second, also in a hiking space, we have seen banks in their anxiety to maintain their market share in the incremental credit also adjust their margins so as not to lose their market share in the incremental credit. So that also impedes a complete transmission in terms of the effective interest rate. So I hope, as we understood from the context of these two parameters.

Y

Yogesh4:14:52

Thank you. Anything you would like to supplement? No. Yeah, I'll move on to Mr. Anun Mishra from ET Now.

A

Anun Mishra4:15:02

Thank you, sir. I would like to ask a question once again on the issue. We understand there has been a meeting with Paytm officials and Bank of India, and what transpired in that? I know I don't want to know the exact details, but from the financial system point of view, the company has been claiming that they have taken all the remedial measures and all the efforts are being made so that there is minimal or no impact on customers. So from that point of view, is there any remedial measure which has been suggested by the Reserve Bank of India?

S

Swaminathan4:15:40

I think this is again a matter of bilateral discussion, so I don't think that will be proper for us to discuss it in this forum. So as I said, discussing on individual entities will not be very proper, giving granular details in this matter. So we are aware of the issue, and as we take steps, we will keep the media and public certainly informed.

S

Shaktikanta Das4:16:05

You see, as the Deputy Governor has already commented, I mean, sufficient, I'm again saying in a general sense, not specific to this case, we give sufficient time. We give sufficient time to every regulated entity, every entity that is supervised by the Reserve Bank, to comply with the requirements, the regulatory requirements. We give sufficient time, and sometimes, as he pointed out, sometimes it may even look more than sufficient time. And we would not like to act. You know, we are a responsible regulator, we are a responsible supervisor. If everything had been complied, I'm talking about in a general sense, why should we act? I mean, after all, we have a responsibility. We are a responsible institution, RBI. So that's how it is.

Y

Yogesh4:17:02

Thank you, sir. Allia Radio.

A

Allia Radio4:17:05

Namaskar, sir.

Y

Yogesh4:17:57

Sir, Business Today.

S

Shaktikanta Das4:17:59

After sir, I'll also make an attempt on, you know, Paytm. DG Swaminathan talked about this persistent non-compliance and he also said in such cases, months and years of bilateral engagement. My question is, why did RBI not consider appointing a director on the board of Paytm when you knew about this persistent non-compliance issues?

S

Swaminathan4:18:24

See, as a regulator, we have various tools in the kitty, and it's not necessary that every single tool will be deployed in every single situation. We make our own assessment to the scale and proportionate of the issue as well as the tool that we will have to use at different points in time. So one-size-fits-all kind of solution may not work in such situations. So I would like to stop there rather than trying to elaborate on that. We may use certain tools, may not use certain tools, but it is after a due consideration that we do.

Y

Yogesh4:19:00

Thank you, sir. I'll move on to Mr. Anil Roy from Bloomberg.

A

Anil Roy4:19:03

Thank you, sir. Sir, the budget was non-inflationary and the government really brought down the fiscal deficit, etc., and the bond yields have fallen. So the government probably wants interest rates to come down, but RBI probably is keeping interest rates high. You're saying the transmission is not complete, etc. Is there a lack of coordination, sir?

S

Shaktikanta Das4:19:28

No, I mean, has the government said anywhere that they want the interest rates to be brought down? So therefore, it's a very speculative proposition, so I cannot reply to that question.

Y

Yogesh4:19:40

Thank you, sir. I'll invite Shama Mishra from Dainik Bhaskar.

S

Shama Mishra4:19:45

Good afternoon, sir. So it's again on Paytm. The situation as we describe it, Paytm is known as one of the pioneers of fintech. Coming to this situation, do you see this as a worrisome situation for the entire sector? And what lesson would you like to highlight for any similar future companies?

S

Shaktikanta Das4:20:08

Now, let me sort of provide some broad guidance on this Paytm issue, because there have been at least four or five questions till now, and there could be many more questions. So let me put the entire thing, let me put the record straight. Now, you said that worry about the system and all that. There is no worry about the system at the moment. Here we are talking about a specific institution, a specific payment bank. As the Deputy Governor Swaminathan has already explained, he has provided several details. Similarly, I also don't want to comment on a specific case, but in this context, I would like to make some general observations, not with specific reference to Paytm as such, but some general observations which includes all our regulated entities. So all our regulated entities, it does not exclude Paytm, it is applicable to all the regulated entities. And in fact, this... No, no, no, the advice is the camera should not focus on this because I have written so many things, these are private parts. So the cameras can focus perhaps on my face. So let me make some general points, and I would like to make about six or seven points. First is that over the last few years, as all of you are aware, we have significantly deepened our supervisory systems, approach, and methods. Number two, our emphasis is always on, as the Deputy Governor has pointed out, our emphasis is always on bilateral engagement with the regulated entity. And in that engagement, we give focus on, and we are completely focused on nudging the regulated entity to take corrective action. Let me rephrase it for you to make note: our emphasis is always on bilateral engagement with the regulated entities with focus on nudging them for corrective action, and sufficient time is given for undertaking such corrective action. The third point, when such constructive engagement which we undertake, when that does not work, or when the regulated entity does not take effective action, we go for imposing supervisory or business restrictions. Number four, such restrictions which we impose are always proportionate to the gravity of the situation. Please take note that such restrictions are proportionate to the gravity of the situation. Number five, all our actions, being a responsible regulator, being a responsible supervisor, all our actions are in the best interest of systemic stability and protection of depositors' or customers' interest. These aspects cannot be compromised. Individual entities should be mindful of these aspects for their long-term success. Number six, over the last few days, we have received a lot of queries, clarifications from various quarters, including members of the public. You have raised a few questions today. So we have noted all these questions and clarifications which have been sought from us, and based on that, we will be issuing a FAQ sometime next week. So that should address all these questions and clarifications which are being raised by you and which have been raised in the public domain and raised bilaterally with us from various quarters. Number seven, finally and emphatically, let me stress and let me emphatically state that the Reserve Bank is and will continue to encourage and support innovation and technology in the financial sector. Let there not be any doubt about Reserve Bank's commitment to promote fintech, to promote innovation, to promote technology in the financial system.

Y

Yogesh4:25:29

Thank you, sir. I will move on to Mr. D.H. Krishan from Moneycontrol.

D

D.H. Krishan4:25:33

Thank you, Yogesh. Thank you, Governor. I have a very short, related question, sir. You know, in your remarks, you stressed about the good governance and sound compliance, and this is not something that you're speaking for the first time. You have been emphasizing this part, and the role of the boards in the regulated entities is extremely critical, as you have pointed out. What is your view on the role of the Paytm board? Because, you know, it didn't happen all of a sudden. Since 2021, RBI has been alerted on the regulatory breaches, and as per the process, the RBI on-site inspection report is passed to the ACB and the board for corrective actions. So probably, you know, if they had acted on time, things would not have worsened to this level. So why is the regulator silent on the role of the board, while the reasons for this action is quite evident?

S

Shaktikanta Das4:26:26

You see, typically we do not share such granular information. We have been engaged with the institution, with the entity, for quite some time. And within that, with whom we interacted and how it was, such granular details, it will not be appropriate on our part to share those details.

Y

Yogesh4:26:51

Thank you, sir. I'll move on to Mr. Vishnath from NDTV Profit.

V

Vishnath4:26:53

Hi, sir. Thank you so much. I'll give a little respite and move to another topic. But on CBDCs, you're talking about introducing additional programmability. We don't need any response on the topic of Paytm, but the point is, you know, the same question is coming up. And also, in as much as we are issuing a FAQ, so I would request if you have still some clarification or something on which you want clarity, I think you can send it bilaterally to us directly. You can mail it to us, we will see to what extent we can address that question. Yeah, sure. My question is with regard to the additional programmability that you're proposing to bring in with respect to the CBDC pilot. The question has been there since the beginning when this topic was introduced by DG Rabi Shankar. Doesn't this go against the fungibility of money? If the intent is to make CBDC the equivalent of paper currency, and if you introduce specific restrictions on usage, does the fungibility factor not go opposite to that?

S

Shaktikanta Das4:27:58

No, we are not imposing a restriction. I think we are making it more flexible. But let DG Rabi Shankar take that question.

R

Rishankar4:28:08

Thank you. You know, shifting to me, so I'll give a more formal answer. I think the best way to think about it is when a family puts some currency notes in a package to be used for, let's say, groceries during the month, it doesn't mean that the fungibility of the currency is lost. It's just that until that spending happens, it can be used for no other purpose. I'm just giving you as an example to be able to think on what we mean by fungibility, what we mean by programmability. When you do programmability, for a moment, fungibility is on hold. We have to realize that it's a facility that we are providing the currency. Again, by way of an example, let's suppose that a school has given some money to a student who won a prize to buy books in a particular shop. So the student can only use this money to buy books in that shop. That's intended. Supposing the student goes and buys that book, he cannot use it for any other purpose. As soon as the book is purchased and the currency goes to the bookshop owner, it again becomes fungible. So it's only for that period that fungibility is limited. Supposing he doesn't spend it, it goes back to the school, fungibility is restored. So it is a way of controlling expenditure that you do not get unless it's digital and that you do not get unless it's a token. It's a facility that is there. We use it, and the facility will typically be agreed by both the recipient as well as the person who puts that condition. So no, to give a very short answer, it doesn't militate against fungibility. It's only a specific use binding.

S

Shaktikanta Das4:30:03

And to extend that reply further, imagine a situation where, you know, later on when CBDC is fully implemented at a later date, if the government wants to give some cash support to certain individuals for a specific purpose, programmability will be useful in such situations. So that the money, the cash which is going from government to such persons can be used for specific purposes. So therefore, it's typical for every household in the beginning of the month to do their own budget and set aside money, you know, one envelope for school fees, one envelope for electricity bills, and it happens. It's a common thing which happens in a large number of households.

Y

Yogesh4:31:00

Thank you, sir. I will request Manojit Saha from Business Standard.

M

Manojit Saha4:31:04

Thank you, sir. So I again go back to the paragraph 21 on liquidity. So you said stance is with respect to rates and incomplete transmission. Does that mean that you are creating elbow room to do liquidity operations, OMO purchase, to infuse liquidity? Because March is going to be very tight, and then such liquidity operation will not be seen out of sync with the stance. So you're separating the stance from liquidity management, and you're saying it is only on rates. Does that give you elbow room to do OMO purchase when liquidity will be very tight in March?

S

Shaktikanta Das4:31:44

You see, what we have attempted to do today is to clarify and clearly state that do not read the stance of monetary policy in terms of excess liquidity prevailing or deficit liquidity prevailing. That's not the point. Liquidity plays a secondary role to support monetary policy transmission. That is, there is a monetary policy, there is a repo rate, liquidity situation in the market. I think that is what the Deputy Governor said in the beginning itself. You clarified that we try to keep the liquidity at a level wherein the overnight call rate, which is the operating target of monetary policy, remains around the repo rate. In the first part of this year, due to various exogenous factors, there was a lot of liquidity. So we conducted variable rate repo auctions, but market took time to adjust. And market also, banks, individual banks make their own analysis of the liquidity situation, and that analysis by the banks also varies within a day. You look at yesterday, or was it the day before, we did two VRR auctions. The response to the first one was very low, I think some 4,000 crores. But then we, same day, we did one more and we got a response of 27,000 crores. So between morning auction when the banks offered 4,000 crores and to a subsequent auction in the afternoon the banks offered 27,000 crores. So therefore, due to various autonomous factors, liquidity situation has been fluctuating in the market. Banks make their own assessments. Banks also take their own decisions. Markets and banks, meaning the banks and the markets, take time to adjust to the evolving liquidity situation. So far as the RBI is concerned, we will remain active, we will remain nimble in our liquidity management. What instruments we will utilize, that will depend on the prevailing situation which will come up from time to time. I cannot say that we will use this and not use this. We have several instruments at our disposal. Depending on situation, we will use the most appropriate instrument. Also, let me ask one thing very straight. Other people also, so I'll move on to Mr. Brajesh Kumar from Zee Business News.

B

Brajesh Kumar4:35:04

Loan sanction, term sheet, charges, specified charges, processing, experience, terms and conditions, digital, already, statutory, one major, all-inclusive interest rate, interest rate, but upfront interest rate.

S

Shaktikanta Das4:37:19

You know, let us be very clear. The banks' terms and conditions are very transparent in the sense that all information is given. But experience statement mandate purely in customers' interest, and I'm sure banks will encourage it because the banks also are interested in the banks are long-term players, so they are not short-term operators. No second questions. Retail customers or important terms and conditions to give greater transparency.

Y

Yogesh4:38:18

Thank you, sir. P. Shukla from Financial Express.

P

P. Shukla4:38:23

Good afternoon, Governor, sir. DGs, Yogesh, sir. Just taking you back to where we started. DG Swaminathan said that there are various tools in kitty with regard to Paytm. How the future course of action will be taken? Sir, very specifically, banks are becoming very hesitant to actually partner with this bank, Paytm Payments Bank, for shifting their customers and their merchants in one go. They are saying that we need regulatory approval for that. So will you provide that? And will you allow the sale of their wallet to other potential payments banks?

S

Swaminathan4:39:02

See, it will be very difficult to provide any hypothetical answers at this point in time. So as I said, there is still time that is provided for customers to continue to access the services that is provided. So during this period, we will see what else needs to be done. And keeping, as Governor also said, that we keep the customer in the center of what needs to be done. So we will take appropriate steps. The second part of your question, in terms of what the other banks will have to do, each of them, it's a business decision. They have got to carry out the required due diligence as per their laid-down board-approved policies, and I'm sure that they will carry out that if they have got to do a partnership. So that's something which we will not comment at this point in time. But what tool and shape it will take is not something which we would like to speculate at this point in time. We may wait for the FAQs which will give you more clarity.

P

P. Shukla4:39:59

Sorry, so banks don't need regulatory approval for taking on board the Paytm customers?

S

Swaminathan4:40:03

It's very specific to a particular item. I think it's better for you to wait for the FAQs. Please be patient, let the FAQ come next week.

Y

Yogesh4:40:14

Okay, thank you, sir. I'll move on to Siti Bat from Reuters.

S

Siti Bat4:40:17

Thank you, sir. Governor, today you've said that next year's growth is projected at 7%. Nominal GDP growth, as per the budget, is projected at 10.5%. I mean, I don't know if my maths is wrong, but effectively that would mean inflation is at around 3.5% next year. Is that right? Are you being a bit too optimistic about growth, or is the government underplaying growth and being very modest in their projections? Thank you.

S

Shaktikanta Das4:40:42

So I think you take that question because he likes to play these balls. No, I will not venture to answer for the government. But my understanding of this is that what goes into the nominal GDP is not CPI inflation, it's the GDP deflator. And GDP deflator is always a weighted combination of CPI and WPI. Now the WPI has been in deflation for most part of this year and it's just emerging out of deflation. So that must be the reason.

Y

Yogesh4:41:11

Thank you, sir. I'll move on to Mr. Mayur Shetty from Times of India.

M

Mayur Shetty4:41:17

Governor, in the development measures, you spoke about reviewing the AePS, and some banks have come out with warnings on how fingerprints can be cloned using silicon. Is that what's caused this thing? And also, since OTP is also being reviewed, does it mean that the traditional forms of KYC are the best option for regulated entities?

S

Shaktikanta Das4:41:45

No, OTP is not being reviewed. What I'm saying is that over the years, it so happens that OTP has become the most popular and commonly used additional factor of authentication. But with the movement of time, various other technologies and methods have come up. So we want to just tell the players in the field that there are other methods also, and RBI will be agnostic to them as long as they are sound methods. The banks and institutions are free to adopt them. But I think let DG Rabi Shankar take the other part of the question with regard to the AePS.

R

Rishankar4:42:33

Yeah, you sort of gave the answer in your question itself. It's basically to ensure that since this is being used in rural and such areas a lot, it's important that the safety of these transactions is ensured. Now, with the passage of time, as in the case of additional factor of authentication, we can use various technologies to do it. So that is essentially the position here. All touchpoint operators will go through a standardized, safe, and secure onboarding process. We can add other factors into it. For example, the switch-on has to be done by the customer instead of it being pre-available on the system, or it can have geo-limits beyond which it cannot operate. Whatever is required for the customers, the idea is that as Reserve Bank has always been placing a lot of emphasis on the security of digital transactions, which we believe is key to ensuring customer adoption, especially customers who are not savvy digitally. But this is an effort in that direction to improve the security of transactions.

Y

Yogesh4:43:49

Thank you, sir. I'll move on to Mr. Hesh Yas from Indian Express.

H

Hesh Yas4:43:52

Hi, sir. Good afternoon, sir. There is an expectation that the stance would be changed to neutral. Sir, what are the preconditions for stance to come to neutral?

S

Shaktikanta Das4:44:08

I cannot give a forward guidance on that. I think when such a thing happens, we will explain how it is. But you see, I'll tell you, the evolving situation continues to be very volatile and uncertain. You look at the commentaries coming out from the central banks, mostly of advanced countries. Sometimes they appear to be giving a forward guidance in one particular direction. Sometimes the market interprets the next guidance to be in a different direction. So therefore, at the moment, we are not giving any forward guidance with regard to stance or rate. When we will, you know, there's a talk of when the central banks world over will cut rates. And as I have said, markets are overshooting, running ahead of the central banks. So I think preconditions, I will not be able to specify unless Dr. Michael Patra wants to comment anything on that. Because these are very volatile times, and so therefore it's better to wait. And when something like that happens, we will explain it appropriately.

Y

Yogesh4:45:31

Thank you, sir. I'll move on to Ms. Gopika Gupta Kumar from The Mint.

G

Gopika Gupta Kumar4:45:36

Thank you, Yogesh. Good afternoon, Governor. Considering that your inflation forecast for next year is at 4.5% and GDP at 7%, and you're saying that RBI needs to be vigilant in the last mile of disinflation, does it rule out a rate cut in FY25? And secondly, on the Paytm issue, what is the larger issue? Is it the KYC, or is it something related to the ownership interlinkage between a regulated and a non-regulated entity? Because if it is KYC, then does RBI need to relook at the minimum regulations around the minimum KYC accounts? That is my second question.

S

Shaktikanta Das4:46:15

No, you know, again, an institution-specific details we would not like to spell out. And let me leave it at that because I cannot really share. It's a bilateral engagement between the RBI and the regulated entity. The regulations are there in their place. The regulations are robust. There is no need for, it is not a case where there was a regulatory deficiency or there was a regulatory correction required. It's an issue of compliance. Compliance with various parameters. You mentioned about KYC, but compliance with so many aspects. Again, let me not specify the details. So regulations are there, regulations are robust, and it's a question of, it's a situation where we are focused on the compliance not being there with the regulatory requirements.

G

Gopika Gupta Kumar4:47:18

Thank you, sir. First question, sorry, first question on the rate hike and the pause.

S

Shaktikanta Das4:47:23

I cannot say that. I think only time will tell. Only time will tell when something like that will happen.

Y

Yogesh4:47:34

Thank you, sir. Last few questions we will take. Shesh.

S

Shesh4:47:41

Namaskar, sir. Thank you.

S

Shaktikanta Das4:49:02

Explanation, banking sector, overall financial system, finance, comp, overall parameters, system or individual level parameters are strong. India's financial system, growth, sound, grow as a supervisor, regulated entity, public interest, customer interest, depositors' interest, overall financial system, financial stability or financial system, custodian, Reserve Bank.

Y

Yogesh4:51:13

Thank you, sir. Priya from Informist Media, and then Anika from Hindu Business Line. Two questions, last two questions.

P

Priya4:51:22

Good afternoon, Governor. So, public debt has been high for three years now because of COVID spending by governments across the world. So, what does RBI specifically now do to raise this as a risk factor, and what are the spillover risks for this for India?

S

Shaktikanta Das4:51:41

You see, I was raising it in a global context, not in the context of India. The India part of the information I have given just by way of information, but my reply was in the global context. You see the footnotes of my monetary policy statement, all the supporting data is given. By the end of this decade, global debt-to-GDP of advanced economies all put together is expected to exceed 100%. On today's date and in future, very surprisingly, you will notice that the debt-to-GDP of the advanced economies are actually much higher than the debt-to-GDP levels of the emerging market economies. Fiscal deficit, advanced economies, reserve currency, money, you know, what you call as creating new money, printing notes. So therefore, these are kind of things. If the debt has to be sustainable for the long-term stability of the global financial system, so therefore I have raised this as an issue which can become a future source of stress to the global financial system. So far as India is concerned, you please again look at my statement. I provide the data in the footnote. The IMF Fiscal Monitor gives out the data for India. The debt-to-GDP for India had gone up to 88%, general government, states and center, had gone up to 88% during the COVID year of 2020 because of the various fiscal measures which were undertaken. And then it projects how by 2028 it's likely to, it has already come around about 81% or so. By 2028, according to the IMF Fiscal Monitor, it is expected to be around 80% or so. So that is the path which I just mentioned by way of information.

Y

Yogesh4:54:08

Thank you, sir. Anika, last.

A

Anika4:54:13

Hi, sir. Good afternoon. So this is not about Paytm, but about UPI. Basically, there were talks about restricting, capping the market share of each app in terms of the UPI transaction volume share. We've seen the deadline was extended, and the market share has only gone up for these platforms. Now that we're seeing the Paytm-led migration happen to some of these platforms like Google Pay and PhonePe, their market share is only increasing. Is there a concern regarding over-reliance on a few specific platforms, and does that raise the risk of them becoming too big? And could the RBI then look at a structure of systemically important payment entities or something like that? And because I'm the last person, just one small clarification. You mentioned the overnight two VRRs in the day. Is there a specific amount or range that the RBI has in mind that you would prefer that banks not park their funds beyond that in SDF?

S

Shaktikanta Das4:55:08

I think DG Rabi Shankar followed by DG Michael Patra. Two questions, but you said last person, so the last mile in the queue should always have priority. So last person, so I think DG Rabi Shankar followed by Michael Patra.

R

Rishankar4:55:25

Yes, since it's the last question, I'll keep it very short. The limit is from the point of view of diffusion of risk, in case some entity doesn't become available for whatever reason at any point in time. But to take it to too big to fail is probably not appropriate here because they are just third-party app providers. The limit of 30% funds don't go through them, so the system is not threatened, except that there could be a temporary inconvenience in terms of shifting over to an additional system. Having said that, it will be for the market to decide. The market forces have to play out such that this percentage is more evenly decided. We will not be interfering in the market process to ensure that the 30% or something is in any case, it's an NPCI requirement. We'll have more players to come in. Hopefully, with technology, we'll get some more players and that percentage can be maintained. We have time till the end of this year anyway.

M

Michael Patra4:56:31

Yeah, we don't have any preconceived limit on how much they put in SDF. The SDF by its very nature is a standing facility, and it's at the discretion of market participants as to how much they want to use. As to why we did two VRR during the day, we assess market conditions and bidding behavior. And in the first option, we realized that there were bids which were higher than the amount we offered. We offered 50, we got a lot more. So we thought that probably they would like to park more in the VRR, which is more remunerated than the SDF, and so we did the second.

S

Swaminathan4:57:15

Yeah, I think DG Swaminathan wants to just one clarification on, because the question came around the UPI apps. See, this particular action is against the payment bank. It's not to be confused with the payment app, which is done right. That's okay. We will clarify through the FAQs, but just to clarify in terms of your question, just as supplemental information, that the UPI app is not impacted by this action.

Y

Yogesh4:57:45

Hello everyone and welcome to this post-policy press conference. With us today we have respected Governor Shri Shaktikanta Das. I had said last time, just say Governor. Okay sir, we have Shri Shaktikanta Das, Governor, Reserve Bank of India with us, along with Dr. Michael Patra, Shri M. Rajeshwar Rao, Shri T. Rabi Shankar, and Shri Swaminathan. Along with us also are our executive directors, Dr. O.P. Mall and Dr. Rajiv Ranjan, and my colleague from MPD and the Secretariat. So we have 22 media persons present here, and as is our want, we will first go with your opening remarks and then we'll go for the press conference. Over to you, sir.

S

Shaktikanta Das4:58:35

Thank you for being here. Good morning. You have already heard the statement; it's been uploaded. As a part of initial remarks, I would like to make nine points. First, domestic economic activity continues to be strong. We expect the real GDP to grow by 7% in the next financial year, 2024-25. Second, CPI inflation is moderating with intermittent interruptions and spikes. We have to remain vigilant about the incoming data and the outlook. Our endeavor to achieve 4% inflation on a durable basis has to continue. Third, globally, markets are front-running central banks in anticipation of policy pivots, but central banks remain apprehensive and await a more durable alignment of inflation with the targets. Four, liquidity will be actively managed by the Reserve Bank. Five, our multi-pronged, proactive, and calibrated policies have worked well to maintain and strengthen macroeconomic and financial stability. Six, systemic, sectoral, and institution-specific signs of stress are being proactively monitored and acted upon wherever necessary. Seven, let me reiterate that good governance, robust risk management, sound compliance culture, and protection of customers' interest are the hallmarks of the Reserve Bank's approach to the safety and stability of the financial system and individual financial institutions. Regulated entities must accord the highest priority to these aspects. This is the seventh point. The eighth point is the external sector of the economy remains resilient. The current account deficit is expected to be eminently manageable. Nine, the exchange rate of the Indian rupee has remained stable. Thank you.

Y

Yogesh5:01:15

Thank you, sir, for those opening remarks. May I request all of you to wait for your turn to be called and request also to stick to one question. If we have time, we'll go for the second or third question. So I'll begin by inviting L. Venkatesh from CNBC TV18.

L

L. Venkatesh5:01:40

Thank you, Governor. Thank you, Yogesh. Well, sir, I'm a little confused about whether you are distinguishing between liquidity and your stance. You have mentioned in three places that the entire rate hike has not been fully transmitted, so I assume you want more hike transmitted. But separately, you have said that you will manage liquidity in great detail with a bunch of instruments. Should we understand, therefore, that unlike the majority of the last five months when call was closer to 6.75, you will be more like you were in the last one week, where you will give long-term liquidity through variable rate repo and adjust for short-term, which is keep call rate closer to 6.5? Is that what you are trying to say? And sir, since you have dwelt twice on this good governance, I must add, are you trying to say that you will not give Paytm any further timeline to set them right? Does February 29 stand?

S

Shaktikanta Das5:02:54

There are two questions actually. Two questions, so please ask one question each. The first part of the question I would request Deputy Governor Michael Patra to reply. The second part I would request Deputy Governor Swaminathan to reply. Go ahead.

M

Michael Patra5:03:10

As Governor has clarified in his statement, the stance is all about the future course of policy rates. Liquidity is endogenous to the rate. When the rate is the chief instrument of monetary policy, liquidity follows the rate. You have to move liquidity to achieve a certain rate. So our objective is to keep the weighted average call rate around the repo rate. But there are times when there are temporary drivers of autonomous liquidity, like government balances, which go through tectonic shifts, and market participants take time to adjust.

to adjust even they are unsure about the future direction of this so that is why sometimes the call rate goes to where it went but you saw that we were nimble in our actions and we brought it down to the repo rate that is our endeavor.

L

L. Venkatesh5:04:04

You were nimble after five months so I'm asking will you be like the previous five months or will you be like the last five days?

M

Michael Patra5:04:11

No that is not correct because at the time when the rates were up we allowed market participants to take what liquidity they wanted from us through our standing facilities and we did the main operation every 14th day so it was not that we let it go but it was the market participants still you saw the reactions to the VRR they were unwilling to let go because they're unsure about how balances will move.

S

Shaktikanta Das5:04:42

Yeah see as you know as a matter of policy we don't comment on individual entity or actions that we initiate in such cases but anyway since this question is on the uppermost of mind of most of you I think I would like to say two three things essentially to set the context. While we don't want to be discussing the individual details here because that will not be proper in terms of context as you all know that this is a supervisory action on a regulated entity for a persistent non-compliance. Second, such supervisory actions are invariably preceded by months and at times years of bilateral engagement where we not only point out the deficiencies but also provide more than adequate time for them to take corrective action. Third, of course, as a regulator it's incumbent upon us to protect the interest of the ultimate consumer and thereby protecting the stability of the financial system so these actions have to be seen in that particular context. Coming to the second part of your question what lies ahead, as part of MPC we don't give a forecast in these matters so I think you will have to wait and of course we have been getting feedback we'll work on and as a responsible regulator suitable steps will be taken to ensure that the customer inconvenience if any is minimized so we will take care. I think with that we can give a rest to this question and then move on to MPC is my request.

Y

Yogesh5:06:19

Thank you sir. I'll move on to Mr. Gaurang Rangan from Economic Times.

G

Gaurang Rangan5:06:25

Thank you sir. Good afternoon Governor. For the rate decision rather, you specifically mentioned that the transmission of 250 basis points is still continuing. So the bankers say that the deposit rates have already gone up by 250 basis points and the lending rates have also gone up. So what in your mind is the actual transmission that has not happened and how much is that and what is the benchmark that you're looking at to conclude that the transmission has happened?

S

Shaktikanta Das5:06:58

Okay again you know like the previous question I would request I think DSG Swaminathan supplemented by DG Michael Patra to reply to that question. Let there be wider participation I don't want to monopolize all the answers so yeah go ahead.

S

Swaminathan5:07:16

Yeah see as far as the transmission in a hiking phase as we have always seen in the past the rates on deposit side resets much faster and they get passed on and as we have seen repo rates have almost played out while on the lending side it does take time to pass for two critical reasons in our assessment. There are two major reasons. One is that the proportion of loans that are benchmarked externally what we call EBLR linked loans is still less than 50% so where the transmission could be instant is only where the EBLR comes into play. In case of other instruments other benchmarks like MCLR or base rates or fixed rate loans it does take time to transmit so that is the precise reason why we still see that transmission is fully not in place. The second also in a hiking phase we have seen banks in their anxiety to maintain their market share in the incremental credit also adjust their margins so as not to lose their market share in the incremental credit so that also impedes a complete transmission in terms of the effective interest rate. So I hope as we understood from the context of these two parameters.

Y

Yogesh5:08:36

Thank you. Anything you would like to supplement? No. Yeah I'll move on to Mr. Anun Mishra from ET now.

A

Anun Mishra5:08:46

Thank you sir. I would like to ask a question once again on the persistent issue. We understand there has been meeting with Paytm officials and Reserve Bank of India and what transpired in that I don't want to know the exact details but from the financial system point of view the company has been claiming that they have taken all the remedial measures and all the efforts are being made so that there is minimal or no impact on customers. So from that point of view is there any remedial measure which has been suggested by Reserve Bank of India?

S

Shaktikanta Das5:09:24

I think this is again a matter of bilateral discussion so I don't think that'll be proper for us to discuss it in this forum. So as I said discussing on individual entities will not be very proper giving granular details in this matter. So we are seized of the issue and as we take steps we will keep the media and public certainly informed.

S

Swaminathan5:09:50

Thank you. You see as the Deputy Governor has already commented I mean sufficient I'm again saying in a general sense not specific to this case we give sufficient time to every regulated entity every entity that is supervised by the Reserve Bank to comply with the requirements the regulatory requirements. We give sufficient time and sometimes as he pointed out sometimes it may even look more than sufficient time and we would not like to act. You know we are a responsible regulator we are a responsible supervisor. If everything had been complied I'm talking about in a general sense why should we act. I mean after all we have a responsibility we are it's a responsible institution RBI so that's how it is.

Y

Yogesh5:10:47

Thank you sir. Allia Radio.

A

Allia Radio5:11:00

Sir, customers higher rates, lending rates, instruments, interest, existing customers, sir, business.

A

Anand Adhikari5:11:43

Today good afternoon sir. I'll also make an attempt on Paytm. You know DG Swaminathan talked about this persistent non-compliance and he also said in such cases months and years of bilateral engagement. My question is why did RBI not consider appointing a director on the board of Paytm when you knew about this persistent non-compliance issues?

S

Shaktikanta Das5:12:08

See as a regulator we have various tools in the kitty and it's not necessary that every single tool will be deployed in every single situation. We make our own assessment to the scale and proportion of the issue as well as the tool that we will have to use at different points in time. So one size fits all kind of solution may not work in such situations. So I would like to stop there rather than trying to elaborate on that. We may use certain tools may not use certain tools but it is after a due consideration that we do.

Y

Yogesh5:12:45

Thank you sir. I'll move on to Mr. Anil Roy from Bloomberg.

A

Anil Roy5:12:48

Thank you sir. Sir the budget was non-inflationary and the government really brought down the fiscal deficit etc and the bond yields have fallen so the government probably wants interest rates to come down but RBI probably is keeping interest rates high you saying the transmission is not complete etc. Is there a lack of coordination sir?

S

Shaktikanta Das5:13:12

No I mean has the government said anywhere that they want the interest rates to be brought down so therefore it's a very speculative proposition so I cannot reply to that question.

Y

Yogesh5:13:25

Thank you sir. I'll invite Shama Mishra from Dainik Bhaskar.

S

Shama Mishra5:13:29

Good afternoon sir. So it's again on Paytm. The situation as we describe it that Paytm is known as one of the pioneers of fintech coming to this situation do you see this as a worrisome situation for the entire sector and what lesson would you like to highlight for any similar future companies?

S

Shaktikanta Das5:13:52

Now let me sort of provide some broad guidance on this Paytm issue because there have been at least four or five questions till now and there could be many more questions so let me put the entire thing let me put the record straight. Now you said that worry about the system and all that there is no worry about the system at the moment here we are talking about a specific institution a specific payments bank. As the Deputy Governor Swaminathan has already explained he has provided several details. Similarly I also don't want to comment on a specific case but in this context I would like to make some general observations not with specific reference to Paytm as such but some general observations which includes all our regulated entities. So all our regulated entities does not exclude Paytm it is applicable to all the regulated entities and in fact this which one no no no the advice is the camera should not focus on this because I have written so many things these are private parts so the cameras can focus perhaps on my face. So let me make some general points and I would like to make about six or seven points. First is that over the last few years as all of you are aware we have significantly deepened our supervisory systems approach and methods. Number two our emphasis is always on as the Deputy Governor has pointed out our emphasis is always on bilateral engagement with the regulated entity and in that engagement we give focus on and we are completely focused on nudging the regulated entity to take corrective action. Let me rephrase it our emphasis is always on bilateral engagement with the regulated entities with focus on nudging them for corrective action and sufficient time is given for undertaking such corrective action. The third point when such constructive engagement which we undertake when that does not work or when the regulated entity does not take effective action we go for imposing supervisory or business restrictions. Number four such restrictions which we impose are always proportionate to the gravity of the situation please take note that such restrictions are proportionate to the gravity of the situation. Number five all our actions being a responsible regulator being a responsible supervisor all our actions are in the best interest of systemic stability and protection of depositors or customers interest. These aspects cannot be compromised individual entities should be mindful of these aspects for their long-term success. Number six over the last few days we have received a lot of queries clarifications from various quarters including members of the public you have raised a few questions today so we have noted all these questions and clarifications which have been sought from us and based on that we will be issuing a FAQ sometime next week so that should address all these questions and clarifications which are being raised by you and which have been raised in the public domain and raised bilaterally with us from various quarters. Number seven finally and emphatically let me stress and let me emphatically state that the Reserve Bank is and will continue to encourage and support innovation and technology in the financial sector. Let there not be any doubt about Reserve Bank's commitment to promote fintech to promote innovation to promote technology in the financial system.

Y

Yogesh5:19:10

Thank you sir. I will move on to Mr. D.H. Krishan from Moneycontrol.

D

D.H. Krishan5:19:16

Thank you Governor. I have a very short related question sir. You in your remarks you stressed about the good governance and sound compliance and this is not something that you speaking for the first time you have been emphasizing this part and the role of the boards in the regulated entities is extremely critical as you have pointed out. What is your view on the role of the Paytm board because it didn't happen all of a sudden since 2021 RBI has been alerting the regulatory breaches and as per the process the RBI on-site inspection report is passed to the ACB and the board for corrective actions so probably if they had acted on time things would not have worsened to this level. So why is the regulator silent on the role of the board while the reasons for this action is quite evident?

S

Shaktikanta Das5:20:09

You see typically we do not share such granular information. We have been engaged with the institution with the entity for quite some time and within that with whom we interacted and how it was such granular details it will not be appropriate on our part to share those details.

Y

Yogesh5:20:35

Thank you sir. I'll move on to Mr. Vishnath from NDTV Profit.

V

Vishnath5:20:37

Hi sir. Thank you so much. I'll give a little respite and move to another topic but on CBDCs you're talking about introducing additional programmability.

S

Shaktikanta Das5:20:49

No we don't need any respite the topic go ahead but the point is the same question is coming up and also as much as we are issuing a FAQ so I would request if you have still some clarification or something on which you want a clarity I think you can send it bilaterally to us directly you can mail it to us we will see to what extent we can address that question.

V

Vishnath5:21:17

Yeah sure. My question is with regard to the additional programmability that you're proposing to bring in with respect to the CBDC pilot. The question has been there since the beginning when this topic was DG Rishankar had introduced. Doesn't this go against the fungibility of money if the intent is to make CBDC the equivalent of paper currency and if you introduce specific restrictions on usage does the fungibility factor not go opposite to that?

S

Shaktikanta Das5:21:43

No we are not imposing a restriction I think we are making it more flexible but let DG Rishankar take that question.

R

Rishankar5:21:52

Thank you. You know shifting to me so I'll give a more formal answer. I think the best way to think about it is when a family puts some currency notes in a package to be used for let's say groceries during the month doesn't mean that the fungibility of the currency is lost it's just that until that spending happens it can be used for no other purpose. I'm just giving you as an example to be able to think on what we mean by fungibility what we mean by programmability. When you do programmability for a moment fungibility is on hold. We have to realize that it's a facility that we are providing the currency. Again by way of an example let's suppose that a school has given some money to a student who won a prize to buy books in a particular shop so the student can only use this money to buy books in that shop that's intended. Supposing the student goes and buys that book he cannot use it for any other purpose as soon as the book is purchased and the currency goes to the book shop owner it again becomes fungible so it's only for that period that fungibility is limited. Supposing he doesn't spend it goes back to the school fungibility is restored so it is a way of controlling expenditure that you do not get unless it's digital and that you do not get unless it's a token it's a facility that is there we'll use and the facility will typically be agreed by both the recipient as well as the person who puts that condition. So to give a very short answer it doesn't militate against the programmability doesn't militate against fungibility it's only a specific use binding.

S

Shaktikanta Das5:23:47

And to extend that reply further imagine a situation where later on when CBDC is fully implemented at a later date if the government wants to give some cash support to certain individuals for a specific purpose programmability will be useful in such situations so that the money the cash which is going from government to such persons can be used for specific purposes. So therefore it's typical for every household in the beginning of the month to do their own budget and set aside money one envelope for school fees one envelope for electricity bills and it happens it's a common thing which happens in large number of households.

Y

Yogesh5:24:42

Yeah next. Thank you sir. I will request Manojit Saha from Business Standard.

M

Manojit Saha5:24:48

Thank you sir. So I again go back to the para 21 on liquidity. So you said stance is with respect to rates and incomplete transmission does that mean that you're creating elbow room to do liquidity operations OMO purchase to infuse liquidity because March is going to be very tight and then such liquidity operation will not be seen out of sync with the stance so you're separating the stance from liquidity management and you're saying it is only on rates does that give you elbow room to do OMO purchase when liquidity will be very tight in March?

S

Shaktikanta Das5:25:28

You see what we have attempted to do today is to clarify and clearly state that do not read the stance of monetary policy in terms of excess liquidity prevailing or deficit liquidity prevailing that's not the point. Liquidity plays a secondary role to support monetary policy transmission. That is there is a monetary policy there is a repo rate liquidity situation in the market. I think that is what the Deputy Governor said in the beginning itself you clarified that we try to keep the liquidity at a level wherein the overnight call rate which is the operating target of monetary policy remains around the repo rate. In the first part of this year due to various exogenous factors there was lot of liquidity so we conducted variable rate repo auctions but market took time to adjust and market also banks individual banks make their own analysis of the liquidity situation and that analysis by the banks also varies within a day. You look at yesterday or was it day before we did two VRR auctions the response to the first one was very low I think some 4,000 crores but then we same day we did one more and we got a response of 27,000 crores. So between morning auction when the banks offered 4,000 crores and to a subsequent auction in the afternoon the banks offered 27,000 crores so therefore due to various autonomous factors liquidity situation has been fluctuating in the market. Banks make their own assessments banks also take their own decision markets and banks meaning the banks and the markets take time to adjust to the evolving liquidity situation. So far as the RBI is concerned we will remain active we will remain nimble in our liquidity management. What instruments we will utilize that will depend on the prevailing situation which will come up from time to time. I cannot say that we will use this and not use this we have several instruments at our disposal depending on situation we will use the most appropriate instrument.

Y

Yogesh5:28:23

Also let me ask one thing very straight back other people also so I'll move on to Mr. Brajesh Kumar from Zee Business.

B

Brajesh Kumar5:28:38

Hidden loan, unification, hidden location, term sheet, specified charges, processing, ordinary borrower, common borrower. I mean experience terms and conditions. Micro finance lending digital already key fact statement. One annualized all inclusive interest rate interest rate but up interest rate hidden.

S

Shaktikanta Das5:31:02

You know let us be very clear the bank's terms and conditions are very transparent in the sense that all information is given but experience simple term sheet statement purely in customers interest and I'm sure banks will encourage it because the banks also are interested in the banks are long-term players so they are not short-term operators. No second question most important terms and conditions to give greater transparency.

Y

Yogesh5:32:01

Thank you Dad. P. Shukla from Financial Express.

P

P. Shukla5:32:08

Good afternoon Governor sir, DGs, Yogesh sir. Just taking you back to where we started. DG Swaminathan said that there are various tools in kitty with regard to Paytm how the future course of action will be taken. Sir very specifically banks are becoming very hesitant to actually partner with this bank Paytm Payments Bank for shifting their customers and their merchants in one go. They are saying that we need regulatory approval for that so will you provide that and will you allow the sale of their wallet to other potential payments bank?

S

Swaminathan5:32:47

See it'll be very difficult to provide any hypothetical answers at this point in time so as I said that there's still time that is provided for customers to continue to access the services that is provided so during this period we will see what else needs to be done and keeping as Governor also said that we keep the customer in the center of what needs to be done so we will take appropriate step. The second part of your question in terms of what the other banks will have to do each of them it's a business decision they have got to carry out the required due diligence as per their laid down board approved policies and I'm sure that they will carry out that if they have got to do a partnership so that's something which we will not comment at this point in time but what tool and shape is it will take is not something which we would like to speculate at this point in time we may wait for the FAQs which will give you more clarity.

P

P. Shukla5:33:41

Sorry so banks don't need regulatory approval for taking on board the Paytm customers?

S

Swaminathan5:33:45

It's very specific to a particular item I think it's better for you to wait for the FAQ as please be patient let the FAQ come next week.

Y

Yogesh5:33:54

Okay thank you sir. I'll move on to Siti Bat from Reuters.

S

Siti Bat5:34:01

Thank you sir. Governor today you've said that next year's growth is projected at 7% nominal GDP growth as per the budget is projected at 10.5%. I mean I don't know if my maths is wrong but effectively that would mean inflation is at around 3.5% next year is that right? Are you being a bit too optimistic about growth or is the government underplaying growth and being very modest in their projections?

S

Shaktikanta Das5:34:23

Thank you so I think you take that question.

M

Michael Patra5:34:28

Yeah because he likes to play these balls. No I will not venture to answer for the government but my understanding of this is that what goes into the nominal GDP is not CPI inflation it's the GDP deflator and GDP deflator is always a weighted combination of CPI and WPI. Now the WPI has been in deflation for most part of this year and it's just emerging out of deflation so that must be the reason.

Y

Yogesh5:34:56

Thank you sir. I'll move on to Mr. Mayur Shetty from Times of India.

M

Mayur Shetty5:35:02

Governor in the development measures you spoke about reviewing the AePS and some banks have come out with warnings on how fingerprints can be cloned using silicon. Is that what's caused this thing? And also since OTP is also being reviewed does it mean that the traditional forms of KYC are the best option for regulated entities?

S

Shaktikanta Das5:35:31

No OTP is not being reviewed what I'm saying is that over the years it so happens that OTP has become the most popular and commonly used AFA you know that additional factor of authentication but with the movement of time various other technologies and methods have come up so we want to just tell the players in the field that there are other methods also and RBI will be agnostic to them as long as they are sound methods the banks and institutions are free to adopt them but I think let DG Rishankar take the other part of the question with regard to the Aadhaar AePS.

R

Rishankar5:36:18

Yeah you sort of gave the answer in your question itself. It's basically to ensure that since this is being used in rural and such areas a lot it's important that the safety of these transactions is ensured. Now with the passage of time as in the case of additional factor of authentication we can use various technologies to do it so that is essentially the position here. All touch point operators will go through a standardized safe and secure onboarding process. We can add other factors into it for example the switch on has to be done by the customer instead of it being pre-available on the system or it can have daily limits beyond which it cannot operate. Whatever is required for the customers the idea is that as Reserve Bank has always been placing a lot of emphasis on the security of digital transactions which we believe is key to ensuring customer adoption especially customers who are not savvy digitally but this is an effort in that direction to improve the security of transactions.

Y

Yogesh5:37:34

Thank you sir. I'll move on to Mr. Hesh Yas from Indian Express.

H

Hesh Yas5:37:39

Sir hi sir good afternoon sir. There is an expectation that the stance would be changed to neutral sir what are the preconditions for stance to become neutral?

S

Shaktikanta Das5:37:52

I cannot give a forward guidance on that. I think when such a thing happens we will explain how it is but you see I'll tell you the evolving situation continues to be very volatile and uncertain. You look at the commentaries coming out from the central banks mostly of advanced countries sometimes they appear to be giving a forward guidance in one particular direction sometimes the market interprets the next guidance to be in a different direction. So therefore at the moment we are not giving any forward guidance with regard to stance or rate. When we will you know market is there's a talk of when the central banks world over will cut rates so and as I have said markets are overshooting running ahead of the central banks so I think preconditions I will not be able to specify unless DG Michael Patra wants to comment anything on that. So because these are very volatile times and so therefore it's better to wait and when something like that happens we will explain it appropriately.

Y

Yogesh5:39:16

Thank you sir. I'll move on to Miss Gopika Gupta Kumar from The Mint.

G

Gopika Gupta Kumar5:39:20

Thank you Yogesh sir. Good afternoon Governor. Considering that your inflation forecast for next year is at 4.5% and GDP at 7% and you're saying that RBI needs to be vigilant in the last mile of disinflation does it rule out a rate cut in FY25? And secondly on the Paytm issue the what is the larger issue is it the KYC or is it something related to the ownership or interlinkage between a regulated and a non-regulated entity because if it is KYC then does RBI need to relook at the minimum regulations around the minimum KYC accounts that is my second question.

S

Shaktikanta Das5:39:59

No you know again an entity specific details we would not like to spell out and let me leave it at that because I cannot really share it's a bilateral engagement between the RBI and the regulated entity. The regulations are there in their place the regulations are robust there is no need it is not a case where there was a regulatory deficiency or there was a regulatory correction required it's an issue of compliance compliance with various parameters. You mentioned about KYC but compliance with so many aspects again let me not specify the details so regulations are there regulations are robust and it's a question of it's a situation where we are focused on the compliance not being there with the regulatory requirements.

G

Gopika Gupta Kumar5:41:02

Thank you sir the first question sorry first question.

S

Shaktikanta Das5:41:08

No on the rate hike and the pause I cannot say that I think only time will tell only time will tell you know when something like that will happen.

Y

Yogesh5:41:18

Thank you sir. Last few questions we will take.

S

Shesh5:41:25

Namaste sir. Thank you Yogesh sir. Namaste sir. Sir Paytm Bank overall financial system non-banking finance company NBFC performance overall parameters systemic level or individual level parameters are strong or India financial system as a supervisor regulated entity NBFC financial institution effective interest customer interest depositors interest overall financial system interest financial stability or financial system Reserve Bank.

Y

Yogesh5:44:57

Thank you sir. Pratigya from Informist Media and then Anika from Hindu Business Line. Two questions last two questions.

P

Pratigya5:45:06

Good afternoon Governor. So public debt has been high for three years now because of COVID spending by governments across the world so what risks does RBI see specifically now to raise this as a risk factor and what are the spillover risks for this for India?

S

Shaktikanta Das5:45:26

You see I was raising it in a global context not in the context of India. The India part of the information I have given just by way of information but my reply was in the global context. You see the footnotes of my monetary policy statement all the supporting data is given. By the end of this decade global debt to GDP of emerging and advanced economies all put together is expected to exceed 100% on today's date and in future very surprisingly you will notice that the debt to GDP of the advanced economies are actually much higher than the debt to GDP levels of the emerging market economies or fiscal deficit advanced economies. Money you know what you call as creating new money printing notes so therefore these are kind of things you know if the debt has to be sustainable for the long-term stability of the global financial system so therefore I have raised this as an issue which can become a future source of stress to the global financial system. So far as India is concerned you please again look at my statement I provide the data in the footnote the IMF fiscal monitor gives out the data for India the debt to GDP for India had gone up to 88% General government States and Center had gone up to 88% during the COVID year of 2020 because of the various fiscal measures which were undertaken and by 2028 it's likely to it has already come around about 81% or so by 2028 according to the IMF's fiscal monitor it is expected to be around 80% or so so that is the path which I just mentioned by way of information.

Y

Yogesh5:47:52

Thank you sir. Anika last last.

A

Anika5:47:59

So this is not about Paytm but about UPI basically there were talks about restricting capping the market share of each app in terms of the UPI transaction volume share we've seen the deadline was extended and the market share has only gone up for these platforms. Now that we're seeing the Paytm migration happen to some of these platforms like Google Pay and PhonePe their market share is only increasing is there a concern regarding over reliance on a few specific platforms and does that raise the risk of them becoming too big and could the RBI then look at a structure of systemically important PA entities or something like that? And because I'm the last person just one small clarification you mentioned the overnight two VRRs in the day two VRRs is there a specific amount or range that the RBI has in mind that you would prefer that banks not park their funds beyond that in SDF?

S

Shaktikanta Das5:48:52

I think DG Rishankar followed by DG Michael Patra two questions but you said last person so the last mile in the queue should always have priority so last person so I think DG Rishankar followed by Michael Patra.

R

Rishankar5:49:09

Yes since it's the last question I'll keep it very short. The limit is from the inflation is moderating with intermittent interruptions and spikes we have to remain vigilant about the incoming data and the outlook. Our endeavor to achieve 4% inflation on a durable basis has to continue. Third globally markets are front running central banks in anticipation of policy pivots but central banks remain apprehensive and await a more durable alignment of inflation with the targets. Four liquidity will be actively managed by the Reserve Bank. Five our multipronged proactive and calibrated policies have worked well to maintain and strengthen macroeconomic and financial stability. Six systemic sectoral and institution specific signs of stress are being proactively monitored and acted upon wherever necessary. Seven let me reiterate that good governance robust risk management sound compliance culture and protection of customers interest are the hallmarks of the Reserve Bank's approach to the safety and stability of the financial system and individual financial institutions. Regulated entities must accord the highest priority to these aspects this is the seventh point. The eighth point is the external sector of the economy remains resilient the current account deficit is expected to be eminently manageable. Nine the exchange rate of the Indian rupee has remained stable.

Y

Yogesh5:51:25

Thank you sir for those opening remarks and may I request all of you to wait for your turn to be called and request also to stick to one question and if we have time we'll go for the other or second or third question. So I'll begin by inviting L. Venkatesh from CNBC TV8.

L

L. Venkatesh5:51:50

Thank you Governor thank you Yogesh. Well sir I'm a little confused about whether you are distinguishing between liquidity and your stance. You have mentioned in three places that the entire rate hike has not been fully transmitted so I assume you want more hike transmitted but separately you have said that you will manage liquidity para 21 in great detail that you will manage liquidity with a bunch of instruments. Should we understand therefore that unlike the majority of the last five months when call was closer to 6.75 you will be more like you were in the last one week where you will give long-term liquidity through VRR repo and adjust for short term which is keep call rate closer to 6.5 is that what you are trying to say? And sir since you have dwelt twice on this good governance I must add are you trying to say that you will not give Paytm any further timeline to set them right does Feb 29 stand is that what we should understand?

S

Shaktikanta Das5:53:05

Questions actually two questions so please ask one question each. The first part of the question I would request Deputy Governor Michael Patra to reply the second part I would request Deputy Governor Swaminathan to reply go ahead.

M

Michael Patra5:53:20

As Governor has clarified in his statement the stance is all about the future course of policy rates. Sorry okay now liquidity is endogenous to the rate when the rate is the chief instrument of monetary policy liquidity follows the rate you have to move liquidity to achieve a certain rate so our objective is to keep the repo rate keep the weighted average call rate around the repo rate but there are times when there are temporary drivers of autonomous liquidity like government balances which go through tectonic shifts and market participants take time to adjust even they are unsure about the future direction of this so that is why sometimes the call rate goes to where it went but you saw that we were nimble in our actions and we brought it down to the repo rate that is our endeavor.

L

L. Venkatesh5:54:14

You were nimble after five months so I'm asking will you be like the previous five months or will you be like the last five days?

M

Michael Patra5:54:20

No that is not correct because at the time when the rates were up we allowed market participants to take what liquidity they wanted from us through our standing facilities and we did the main operation every 14th day so it was not that we let it go but it was the market participants still you saw the reactions to the VRR they were unwilling to let go because they're unsure about how balances will move.

S

Shaktikanta Das5:54:52

Yeah see as you know as a matter of policy we don't comment on individual entity or actions that we initiate in such cases but anyway since this question is on the uppermost of mind of most of you I think I would like to say two three things essentially to set the context. While we don't want to be discussing the individual details here because that will not be proper in terms of context as you all know that this is a supervisory action on a regulated entity for a persistent non-compliance. Second, such supervisory actions are invariably preceded by months and at times years of bilateral engagement where we not only point out the deficiencies but also provide more than adequate time for them to take corrective action. Third, of course, as a regulator it's incumbent upon us to protect the interest of the ultimate consumer and thereby protecting the stability of the financial system so these actions have to be seen in that particular context. Coming to the second part of your question what lies ahead, as part of MPC we don't give a forecast in these matters so I think you will have to wait and of course we have been getting feedback we'll work on and as a responsible regulator suitable steps will be taken to ensure that the customer inconvenience if any is minimized so we will take care. I think with that we can give a rest to this question and then move on to MPC is my request.

Y

Yogesh5:56:28

Thank you sir. I'll move on to Mr. Gaurang Rangan from Economic Times.

G

Gaurang Rangan5:56:35

Thank you sir. Good afternoon Governor. For the rate decision rather you specifically mentioned that the transmission of 250 basis points is still continuing. So the bankers say that the deposit rates have already gone up by 250 basis points and the lending rates have also gone up. So what in your mind is the actual transmission that has not happened and how much is that and what is the benchmark that you're looking at to conclude that the transmission has happened?

S

Shaktikanta Das5:57:08

Okay again you know like the previous questions I would request I think DSG Swaminathan supplemented by DG Michael Patra to reply to that question. Let there be wider participation I don't want to monopolize all the answers so yeah go ahead.

S

Swaminathan5:57:25

Yeah see as far as the transmission in a hiking phase as we have always seen in the past the rates on deposit side resets much faster and they get passed on and as we have seen repo rates have almost played out while on the lending side it does take time to pass for two critical reasons in our assessment. There are two major reasons. One is that the proportion of loans that are benchmarked externally what we call EBLR linked loans is still less than 50% so where the transmission could be instant is only where the EBLR comes into play. In case of other instruments other benchmarks like MCLR or base rates or fixed rate loans it does take time to transmit so that is the precise reason why we still see that transmission is fully not in place. The second also in a hiking phase we have seen banks in their anxiety to maintain their market share in the incremental credit also adjust their margins so as not to lose their market share in the incremental credit so that also impedes a complete transmission in terms of the effective interest rate. So I hope as we understood from the context of these two parameters.

Y

Yogesh5:58:44

Thank you. Anything you would like to supplement? No. Yeah I'll move on to Mr. Anun Mishra from ET now.

A

Anun Mishra5:58:56

Thank you sir. I would like to ask a question once again on the persistent issue. We understand there has been meeting with Paytm officials and Reserve Bank of India and what transpired in that I don't want to know the exact details but from the financial system point of view the company has been claiming that they have taken all the remedial measures and all the efforts are being made so that there is minimal or no impact on customers. So from that point of view is there any remedial measure which has been suggested by Reserve Bank of India?

S

Shaktikanta Das5:59:34

I think this is again a matter of bilateral discussion so I don't think that it'll be proper for us to discuss it in this forum. So as I said discussing on individual entities will not be very proper giving granular details in this matter. So we are seized of the issue and as we take steps we will keep the media and public certainly informed.

S

Swaminathan5:59:59

Thank you. You see as the Deputy Governor has already commented I mean sufficient I'm again saying in a general sense not specific to this case we give sufficient time to every regulated entity every entity that is supervised by the Reserve Bank to comply with the requirements the regulatory requirements. We give sufficient time and sometimes as he pointed out sometimes it may even look more than sufficient time and we would not like to act. You know we are a responsible regulator we are a responsible supervisor. If everything had been complied I'm talking about in a general sense why should we act. I mean after all we have a responsibility we are it's a responsible institution RBI so that's how it is.

Y

Yogesh6:00:53

Thank you sir. All India Radio.

A

Allia Radio6:01:24

Interest rates customers existing customers.

A

Anand Adhikari6:01:50

Business Today good afternoon sir. I'll also make an attempt on Paytm. You know DG Swaminathan talked about this persistent non-compliance and he also said in such cases months and years of bilateral engagement. My question is why did RBI not consider appointing a director on the board of Paytm when you knew about this persistent non-compliance issues?

S

Shaktikanta Das6:02:18

See as a regulator we have various tools in the kitty and it's not necessary that every single tool will be deployed in every single situation. We make our own assessment to the scale and proportion of the issue as well as the tool that we will have to use at different points in time. So one size fits all kind of solution may not work in such situations. So I would like to stop there rather than trying to elaborate on that. We may use certain tools may not use certain tools but it is after a due consideration that we do.

Y

Yogesh6:02:52

Thank you sir. I'll move on to Mr. Anil Roy from Bloomberg.

A

Anil Roy6:02:58

Thank you sir. Sir the budget was non-inflationary and the government really brought down the fiscal deficit etc and the bond yields have fallen so the government probably wants interest rates to come down but RBI probably is keeping interest rates high you saying the transmission is not complete etc. Is there a lack of coordination sir?

S

Shaktikanta Das6:03:19

No I mean has the government said anywhere that they want the interest rates to be brought down so therefore it's a very speculative proposition so I cannot reply to that question.

the interest rates to be brought down so therefore it's a very speculative proposition so I cannot reply to that question.

Y

Yogesh6:03:35

Thank you, thank you sir. I'll invite Shama Mishra from Dainik Bhaskar.

S

Shama Mishra6:03:39

Good afternoon sir. So it's again on Paytm. The situation as we describe it, Paytm is known as one of the pioneers of fintech. Coming to this situation, do you see this as a worrisome situation for the entire sector and what lesson would you like to highlight for any similar future companies?

S

Shaktikanta Das6:04:02

Now let me sort of provide some broad guidance on this Paytm issue because there have been at least four or five questions till now and there could be many more questions. So let me put the record straight. Now you said that worry about the system and all that, there is no worry about the system at the moment. Here we are talking about a specific institution, a specific payment bank. As the Deputy Governor Swaminathan has already explained, he has provided several details. Similarly, I also don't want to comment on a specific case, but in this context I would like to make some general observations, not with specific reference to Paytm as such, but some general observations which includes all our regulated entities. So all our regulated entities, it does not exclude Paytm, it is applicable to all the regulated entities. And in fact, this which one... no no no no, the advice is the camera should not focus on this because I have written so many things, these are private parts, so the cameras can focus perhaps on my face. So but let me thank you, I think that's very agile on his part. So let me focus on some, make some general points and I would like to make about six or seven points. Now first is that over the last few years as all of you are aware we have significantly deepened our supervisory systems, approach and methods. Number two, our emphasis is always on, as the Deputy Governor has pointed out, our emphasis is always on bilateral engagement with the regulated entity and we in that engagement we give focus on and we are completely focused on nudging the regulated entity to take corrective action. Let me rephrase it, our emphasis is always on bilateral engagement with the regulated entities with focus on nudging them for corrective action and sufficient time is given for undertaking such corrective action. The third point, when such constructive engagement which we undertake, when that does not work, so when such constructive engagement does not work or when the regulated entity does not take effective action, we go for imposing supervisory or business restrictions. Number four, such restrictions which we impose are always proportionate to the gravity of the situation. Please take note that such restrictions are proportionate to the gravity of the situation. Number five, all our actions being a responsible regulator, being a responsible supervisor, all our actions are in the best interest of systemic stability and protection of depositors or customers' interest. These aspects cannot be compromised. Individual entities should be mindful of these aspects for their long-term success. Number six, over the last few days we have received a lot of queries, clarifications from various quarters including members of the public. You have raised a few questions today, so we have noted all these questions and clarifications which have been sought from us and based on that we will be issuing a FAQ sometime next week. So that should address all these questions and clarifications which are being raised by you and which have been raised in the public domain and raised bilaterally with us from various quarters. Number seven, finally and emphatically, let me stress and let me emphatically state that the Reserve Bank is and will continue to encourage and support innovation and technology in the financial sector. Let there not be any doubt about Reserve Bank's commitment to promote fintech, to promote innovation, to promote technology in the financial system. Thank you.

Y

Yogesh6:09:20

Thank you, thank you sir. I will move on to Mr. D.H. Krishan from Moneycontrol.

D

D.H. Krishan6:09:27

Thank you Yogesh. Thank you Governor. I have a very short related question sir. You in your remarks you stressed about the good governance and sound compliance and this is not something that you are speaking for the first time, you have been emphasizing this part. And the role of the boards in the regulated entities is extremely critical as you have pointed out. What is your view on the role of the Paytm board? Because it didn't happen all of a sudden, since 2021 RBI has been alerting the regulatory breaches and as per the process the RBI onsite inspection report is passed to the ACB and the board for corrective actions. So probably if they had acted on time things would not have worsened to this level. So why is the regulator silent on the role of the board while the reasons for this action is quite evident?

S

Shaktikanta Das6:10:21

You see, typically we do not share such granular information. We have been engaged with the institution, with the entity for quite some time and within that, with whom we interacted and how it was, such granular details it will not be appropriate on our part to share those details.

Y

Yogesh6:10:45

Thank you sir. I'll move on to Mr. Vishnath from NDTV Profit.

V

Vishnath6:10:50

Hi sir, thank you so much. I'll give a little respite and move to another topic. On CBDCs, you're talking about introducing additional programmability. The question has been there since the beginning when this topic was introduced. Doesn't this go against the fungibility of money? If the intent is to make CBDC the equivalent of paper currency and if you introduce specific restrictions on usage, does the fungibility factor not go opposite to that?

S

Shaktikanta Das6:11:52

No, we are not imposing a restriction. I think we are making it more flexible. But let Deputy Governor Rabi Shankar take that question.

R

Rishankar6:12:02

Thank you. You know, shifting to me, I'll give a more formal answer. I think the best way to think about it is when a family puts some currency notes in a package to be used for let's say groceries during the month, doesn't mean that the fungibility of the currency is lost. It's just that until that spending happens it can be used for no other purpose. I'm just giving you as an example to be able to think on what we mean by fungibility, what we mean by programmability. When you do programmability, for a moment fungibility is on hold. We have to realize that it's a facility that we are providing the currency. Again by way of an example, let's suppose that a school has given some money to a student who won a prize to buy books in a particular shop. So the student can only use this money to buy books in that shop, that's intended. Supposing the student goes and buys that book, he cannot use it for any other purpose. As soon as the book is purchased and the currency goes to the bookshop owner, it again becomes fungible. So it's only for that period that fungibility is limited. Supposing he doesn't spend it, it goes back to the school, fungibility is restored. So it is a way of controlling expenditure that you do not get unless it's digital and that you do not get unless it's a token. It's a facility that is there, we'll use, and the facility will typically be agreed by both the recipient as well as the person who puts that condition. So no, to give a very short answer, programmability doesn't militate against fungibility. It's only a specific use binding.

S

Shaktikanta Das6:13:59

Thank you. And to extend that reply further, imagine a situation where later on when CBDC is fully implemented at a later date, if the government wants to give some cash support to certain individuals for a specific purpose, programmability will be useful in such situations so that the money, the cash which is going from government to such persons can be used for specific purposes. So therefore it's typical for every household in the beginning of the month to do their own budget and set aside money, one envelope for school fees, one envelope for electricity bills, and it happens. It's a common thing which happens in large number of households.

Y

Yogesh6:14:51

Yeah, next. Thank you sir. I will request Manojit Saha from Business Standard.

M

Manojit Saha6:14:58

Thank you sir. So I again go back to the paragraph 21 on liquidity. So you said stance is with respect to rates and incomplete transmission. Does that mean that you're creating elbow room to do liquidity operations, OMO purchases to infuse liquidity? Because March is going to be very tight and then such liquidity operation will not be seen out of sync with the stance. So you're separating the stance from liquidity management and you're saying it is only on rates. Does that give you elbow room to do OMO purchases when liquidity will be very tight in March?

S

Shaktikanta Das6:15:38

You see, what we have attempted to do today is to clarify and clearly state that do not read the stance of monetary policy in terms of excess liquidity prevailing or deficit liquidity prevailing. That's not the point. Liquidity plays a secondary role to support monetary policy transmission. That is, there is a monetary policy, there is a repo rate, liquidity situation in the market. I think that is what the Deputy Governor said in the beginning itself. You clarified that we try to keep the liquidity at a level wherein the overnight call rate, which is the operating target of monetary policy, remains around the repo rate. In the first part of this year due to various exogenous factors there was lot of liquidity, so we conducted variable rate repo auctions. But market took time to adjust and banks, individual banks make their own analysis of the liquidity situation and that analysis by the banks also varies within a day. You look at yesterday, or was it day before, we did two VRR auctions. The response to the first one was very low, I think some 4,000 crores. But then we same day we did one more and we got a response of 27,000 crores. So between morning auction when the banks offered 4,000 crore and to a subsequent auction in the afternoon the banks offered 27,000 crore. So therefore due to various autonomous factors liquidity situation has been fluctuating in the market. Banks make their own assessments, banks also take their own decisions. Markets and banks, meaning the banks and the markets, take time to adjust to the evolving liquidity situation. So far as the RBI is concerned, we will remain active, we will remain nimble in our liquidity management. What instruments we will utilize that will depend on the prevailing situation which will come up from time to time. I cannot say that we will use this and not use this. We have several instruments at our disposal, depending on situation we will use the most appropriate instrument.

Y

Yogesh6:18:36

Also let me ask one thing very straight. Other people also, so I'll move on to Mr. Brajesh Kumar from Zee Business.

B

Brajesh Kumar6:18:49

Sir, my question is on digital lending. The RBI has already issued guidelines on digital lending. One major thing is the key fact statement which mentions the annualized all-inclusive interest rate. But there are still issues with hidden processing fees, hidden costs, prepayment charges, and other specified charges. So what more steps is the RBI taking to ensure transparency in digital lending?

S

Shaktikanta Das6:21:13

You know, let us be very clear. The banks' terms and conditions are very transparent in the sense that all information is given. But the key fact statement is purely in customers' interest and I'm sure banks will encourage it because the banks are long-term players, they are not short-term operators. No second question.

Y

Yogesh6:22:11

Thank you. P. Shukla from Financial Express.

P

P. Shukla6:22:15

Good afternoon Governor sir, DGs, Yogesh sir. Just taking you back to where we started. DG Swaminathan said that there are various tools in kitty with regard to Paytm. How the future course of action will be taken? Sir, very specifically, banks are becoming very hesitant to actually partner with Paytm Payments Bank for shifting their customers and their merchants in one go. They are saying that we need regulatory approval for that. So will you provide that and will you allow the sale of their wallet to other potential payments banks?

S

Swaminathan6:22:57

See, it will be very difficult to provide any hypothetical answers at this point in time. So as I said, there is still time that is provided for customers to continue to access the services that is provided. So during this period we will see what else needs to be done and keeping, as Governor also said, that we keep the customer in the center of what needs to be done. So we will take appropriate steps. The second part of your question in terms of what the other banks will have to do, each of them, it's a business decision. They have got to carry out the required due diligence as per their laid down board approved policies and I'm sure that they will carry out that if they have got to do a partnership. So that's something which we will not comment at this point in time. But what tool and shape it will take is not something which we would like to speculate at this point in time. We may wait for the FAQ which will give you more clarity.

P

P. Shukla6:23:52

Sorry, so banks don't need regulatory approval for taking on board the Paytm customer liabilities?

S

Swaminathan6:23:57

It's very specific to a particular item. I think it's better for you to wait for the FAQ. Please be patient, let the FAQ come next week.

Y

Yogesh6:24:05

Okay, thank you sir. I'll move on to Siti Bat from Reuters.

S

Siti Bat6:24:11

Thank you sir. Governor, today you've said that next year's growth is projected at 7%. Nominal GDP growth as per the budget is projected at 10.5%. I mean I don't know if my maths is wrong but effectively that would mean inflation is around 3.5% next year. Is that right? Are you being a bit too optimistic about growth or is the government underplaying growth and being very modest in their projections?

S

Shaktikanta Das6:24:33

Thank you. So I think you take that question because he likes to play these balls. No, I will not venture to answer for the government. But my understanding of this is that what goes into the nominal GDP is not CPI inflation, it's the GDP deflator. And GDP deflator is always a weighted combination of CPI and WPI. Now the WPI has been in deflation for most part of this year and it's just emerging out of deflation. So that must be the reason.

Y

Yogesh6:25:06

Thank you sir. I'll move on to Mr. Mayur Shetty from Times of India.

M

Mayur Shetty6:25:12

Governor, in the development measures you spoke about reviewing the AEPS. And some banks have come out with warnings on how fingerprints can be cloned using silicon. Is that what's caused this thing? And also since OTP is also being reviewed, does it mean that the traditional forms of KYC are the best option for regulated entities?

S

Shaktikanta Das6:25:39

No, OTP is not being reviewed. What I'm saying is that over the years it so happens that OTP has become the most popular and commonly used AFA, you know, that additional factor of authentication. But with the movement of time various other technologies and methods have come up. So we want to just tell the players in the field that there are other methods also and RBI will be agnostic to them as long as they are sound methods. The banks and institutions are free to adopt them. But I think let Deputy Governor Rabi Shankar take the other part of the question with regard to the other AEPS.

R

Rishankar6:26:24

Yeah, you sort of gave the answer in your question itself. It's basically to ensure that since this is being used in rural and such areas a lot, it's important that the safety of these transactions is ensured. Now with the passage of time, as in the case of additional factor of authentication, we can use various technologies to do it. So that is essentially the position here. All touch point operators will go through a standardized, safe and secure onboarding process. We can add other factors into it. For example, the switch on has to be done by the customer instead of it being pre-available on the system, or it can have geo-limits beyond which it cannot operate. Whatever is required for the customers, the idea is that as Reserve Bank has always been placing a lot of emphasis on the security of digital transactions, which we believe is key to ensuring customer adoption, especially customers who are not savvy digitally. But this is an effort in that direction to improve the security of transactions.

Y

Yogesh6:27:44

Thank you sir. I'll move on to Mr. Hesh Yas from Indian Express.

H

Hesh Yas6:27:49

Hi sir, good afternoon sir. There is an expectation that the stance would be changed to neutral. Sir, what are the preconditions for stance to become neutral?

S

Shaktikanta Das6:28:02

I cannot give a forward guidance on that. I think when such a thing happens we will explain how it is. But you see, I'll tell you, the evolving situation continues to be very volatile and uncertain. You look at the commentaries coming out from the central banks mostly of advanced countries. Sometimes they appear to be giving forward guidance in one particular direction, sometimes the market interprets the next guidance to be in a different direction. So therefore at the moment we are not giving any forward guidance with regard to stance or rate. When we will, you know, market is there's a talk of when the central banks world over will cut rates. And as I have said, markets are overshooting, running ahead of the central banks. So I think preconditions I will not be able to specify unless Dr. Michael Patra wants to comment anything on that. So because these are very volatile times and so therefore it's better to wait and when something like that happens we will explain it appropriately.

Y

Yogesh6:29:26

Thank you sir. I'll move on to Ms. Gopika Gupta Kumar from The Mint.

G

Gopika Gupta Kumar6:29:30

Thank you Yogesh sir. Good afternoon Governor. Considering that your inflation forecast for next year is at 4.5% and GDP at 7%, and you're saying that RBI needs to be vigilant in the last mile of disinflation, does it rule out a rate cut in FY25? And secondly on the Paytm issue, what is the larger issue? Is it the KYC or is it something related to the ownership or interlinkage between a regulated and a non-regulated entity? Because if it is KYC then does RBI need to relook at the minimum regulations around the minimum KYC accounts?

S

Shaktikanta Das6:30:10

No, you know again, an entity specific details we would not like to spell out. And let me leave it at that because I cannot really share, it's a bilateral engagement between the RBI and the regulated entity. The regulations are there in their place, the regulations are robust. There is no need for, it is not a case where there was a regulatory deficiency or there was a regulatory correction required. It's an issue of compliance, compliance with various parameters. You mentioned about KYC, compliance with so many aspects. Again let me not specify the details. So regulations are there, regulations are robust and it's a question of, it's a situation where we are focused on the compliance not being there with the regulatory requirements.

G

Gopika Gupta Kumar6:31:12

Thank you sir. The first question, sorry, on the rate hike and the pause?

S

Shaktikanta Das6:31:18

No, I cannot say that. I think only time will tell. Only time will tell when something like that will happen.

Y

Yogesh6:31:25

So thank you sir. Last few questions we will take. Shesh from Swadesh.

S

Shesh6:31:35

Namaste sir. Thank you Yogesh sir. Namaste sir. My question is about the overall financial system. Whether at the overall level or individual level, are the parameters strong? Is India's financial system growing? As a supervisor, are the regulated NBFCs and financial institutions facing any deviations? Is there any specific effective action needed in the interest of customers, depositors, and overall financial system stability? Is the Reserve Bank committed to that?

Y

Yogesh6:35:02

Thank you sir. Priya from Informist Media and then Anika from Hindu Business Line. Two questions, last two questions.

P

Priya6:35:16

Good afternoon Governor. So public debt has been high for three years now because of COVID spending by governments across the world. So what risks does RBI see specifically now to raise this as a risk factor and what are the spillover risks for India?

S

Shaktikanta Das6:35:36

You see, I was raising it in a global context, not in the context of India. The India part of the information I have given just by way of information, but my reply was in the global context. You see the footnotes of my monetary policy statement, all the supporting data is given. By the end of this decade, global debt to GDP of advanced economies all put together is expected to exceed 100%. On today's date and in future, very surprisingly you will notice that the debt to GDP of the advanced economies are actually much higher than the debt to GDP levels of the emerging market economies. So therefore these are kind of things, you know, if the debt has to be sustainable for the long-term stability of the global financial system. So therefore I have raised this as an issue which can become a future source of stress to the global financial system. So far as India is concerned, you please again look at my statement, I provide the data in the footnote. The IMF fiscal monitor gives out the data for India. The debt to GDP for India had gone up to 88%, general government, states and center, had gone up to 88% during the COVID year of 2020 because of the various fiscal measures which were undertaken. And by 2028, it has already come around about 81% or so. By 2028 according to the IMF fiscal monitor it is expected to be around 80% or so. So that is the path which I just mentioned by way of information.

Y

Yogesh6:38:02

Thank you sir. Anika, last.

A

Anika6:38:07

Hi sir, good afternoon. So this is not about Paytm but about UPI. Basically there were talks about restricting, capping the market share of each app in terms of the UPI transaction volume share. We've seen the deadline was extended and the market share has only gone up for these platforms. Now that we're seeing the Paytm migration happen to some of these platforms like Google Pay and PhonePe, their market share is only increasing. Is there a concern regarding over-reliance on a few specific platforms and does that raise the risk of them becoming too big? And could the RBI then look at a structure of systemically important payment entities or something like that? And because I'm the last person, just one small clarification. You mentioned the overnight two VRRs in the day. Is there a specific amount or range that the RBI has in mind that you would prefer that banks not park their funds beyond that in SDF?

S

Shaktikanta Das6:39:03

I think Deputy Governor Rabi Shankar followed by Deputy Governor Michael Patra. Two questions but you said last person so the last mile in the queue should always have priority. So last person, I think Deputy Governor Rabi Shankar followed by Michael Patra.

R

Rishankar6:39:17

Yes, since it's the last question I'll keep it very short. The limit is from the point of view of diffusion of risk in case some entity becomes unavailable for whatever reason at any point in time. But to take it to too big to fail sort of is probably not appropriate here because they are just third party app providers. The limit of 30%, funds don't go through them so the system is not threatened except that there could be a temporary inconvenience in terms of shifting over to additional system. Having said that, it will be for the market to decide. The market forces have to play out such that this percentage is more evenly decided. We will not be interfering in the market process to ensure that the 30% or something is maintained. In any case it's an NPCI requirement. We'll have more players to come in, hopefully with technology we will get some more players and that percentage can be maintained. We have time till the end of this year.

M

Michael Patra6:40:26

Yeah, we don't have any pre-conceived limit on how much they put in SDF. The SDF by its very nature is a standing facility and it's at the discretion of market participants as to how much they want to use. As to why we did two VRRs during the day, we assess market conditions and bidding behavior. And in the first option we realized that there were bids which were higher than the amount we offered. We offered 50, we got a lot more. So we thought that probably they would like to park more in the VRR which is more remunerative than the SDF, and so we did the second.

S

Swaminathan6:41:09

Yeah, I think Deputy Governor Swaminathan wants to just one clarification. Because the question came around the UPI apps, this particular action is against the payments bank. It's not to be confused with the payment app which is done right. That's okay, we will clarify through the FAQs. But just to clarify in terms of your question, just as supplemental information, that as an app is not impacted by this action.

Y

Yogesh7:04:50

Hello everyone and welcome to this post-policy press conference. With us today we have respected Governor Shri Shaktikanta Das. I had said last time, just say Governor. Okay sir, we have Shri Shaktikanta Das, Governor, Reserve Bank of India with us along with Dr. Michael Patra, Shri M. Rajeshwar Rao, Shri T. Rabi Shankar and Shri Swaminathan J. Along with us also are Executive Directors Dr. O.P. Malhotra and Dr. Raj Ranjan and my colleague from MPD and the Secretariat. So we have 22 media persons present here and as is our want, we will first go with your opening remarks and then we'll go for the press conference. Over to you sir.

S

Shaktikanta Das7:05:38

Thank you for being here. Good morning. You have already heard the statement, it's been uploaded also. As a part of initial remarks I would like to make nine points. First, domestic economic activity continues to be strong. We expect the real GDP to grow by 7% in the next financial year 2024-25. Second point, CPI inflation is moderating with intermittent interruptions and spikes. We have to remain vigilant about the incoming data and the outlook. Our endeavor to achieve 4% inflation on a durable basis has to continue. Third, globally markets are front running central banks in anticipation of policy pivots but central banks remain apprehensive and await a more durable alignment of inflation with the targets. Four, liquidity will be actively managed by the Reserve Bank. Five, our multi-pronged, proactive and calibrated policies have worked well to maintain and strengthen macroeconomic and financial stability. Six, systemic, sectoral and institution-specific signs of stress are being proactively monitored and acted upon wherever necessary. Seven, let me reiterate that good governance, robust risk management, sound compliance culture and protection of customers' interest are the hallmarks of the Reserve Bank's approach to the safety and stability of the financial system and individual financial institutions. Regulated entities must accord the highest priority to these aspects. This is the seventh point. The eighth point is the external sector of the economy remains resilient. The current account deficit is expected to be eminently manageable. Nine, the exchange rate of the Indian rupee has remained stable. Thank you.

Y

Yogesh7:08:22

Thank you sir for those opening remarks. And may I request all of you to wait for your turn to be called and request also to stick to one question. And if we have time we'll go for the second or third question. So I'll begin by inviting L. Venkatesh from CNBC TV18.

L

L. Venkatesh7:08:43

Thank you Governor, thank you Yogesh. Well sir, I'm a little confused about whether you are distinguishing between liquidity and your stance. You have mentioned in three places that the entire rate hike has not been fully transmitted. So I assume you want more hike transmitted. But separately you have said that you will manage liquidity, paragraph 21, in great detail, that you will manage liquidity with a bunch of instruments. Should we understand therefore that unlike the majority of the last five months when call was closer to 6.75, you will be more like you were in the last one week where you will give long-term liquidity through VRR and adjust for short-term, which is keep call rate closer to 6.5? Is that what you are trying to say? That I'll do that but I want more interest rate hikes to happen. And sir since you have dwelt twice on this good governance, I must add, are you trying to say that you will not give Paytm any further timeline to set them right? Does Feb 29 stand?

S

Shaktikanta Das7:10:01

There are two questions actually. Two questions, so please ask one question each. The first part of the question I would request Deputy Governor Michael Patra to reply. The second part I would request Deputy Governor Swaminathan to reply. Go ahead.

M

Michael Patra7:10:14

As Governor has clarified in his statement, the stance is all about the future course of policy rates. Liquidity is endogenous to the rate. When the rate is the chief instrument of monetary policy, liquidity follows the rate. You have to move liquidity to achieve a certain rate. So our objective is to keep the weighted average call rate around the repo rate. But there are times when there are temporary drivers of autonomous liquidity like government balances which go through tectonic shifts and market participants take time to adjust. Even they are unsure about the future direction of this. So that is why sometimes the call rate goes to where it went. But you saw that we were nimble in our actions and we brought it down to the repo rate. That is our endeavor.

L

L. Venkatesh7:11:08

You were nimble after five months. So I'm asking, will you be like the previous five months or will you be like the last five days?

M

Michael Patra7:11:14

No, that is not correct. Because at the time when the rates were up, we allowed market participants to take what liquidity they wanted from us through our standing facilities and we did the main operation every 14th day. So it was not that we let it go. But it was the market participants, you saw the reactions to the VRR, they were unwilling to let go because they're unsure about how balances will move.

S

Swaminathan7:11:46

Yeah, see, as you know, as a matter of policy we don't comment on individual entity or actions that we initiate in such cases. But anyway, since this question is on the uppermost of mind of most of you, I think I would like to say two-three things essentially to set the context. While we don't want to be discussing the individual details here because that will not be proper, in terms of context, as you all know that this is a supervisory action on a regulated entity for a persistent non-compliance. Second, such supervisory actions are invariably preceded by months and at times years of bilateral engagement where we are not only pointing out the deficiencies but also provide more than adequate time for them to take corrective action. Third, of course, is in terms of as a regulator it's incumbent upon us to protect the interest of the ultimate consumer and thereby protecting the stability of the financial system. So these actions have to be seen in that particular context. Coming to the second part of your question, what lies ahead, as part of MPC we don't give a forecast in these matters. So I think you will have to wait. And of course we have been getting feedback, we'll work on it and as a responsible regulator suitable steps will be taken to ensure that the customer inconvenience if any is minimized. So we will take care. I think with that we can give a rest to this question and then move on to MPC is my request.

Y

Yogesh7:13:20

Thank you sir. I'll move on to Mr. Gaurang Rangan from Economic Times.

G

Gaurang Rangan7:13:29

Thank you sir. Good afternoon Governor. For the rate decision, rather I would say the status quo, you specifically mentioned that the transmission of 250 basis points is still continuing. So the bankers say that the deposit rates have already gone up by 250 basis points and the lending rates have also gone up. So what in your mind is the actual transmission that has not happened and how much is that? And what is the benchmark that you're looking at to conclude that the transmission has happened?

S

Shaktikanta Das7:14:02

Okay, again, like the previous questions, I would request I think Deputy Governor Swaminathan supplemented by Deputy Governor Michael Patra to reply to that question. Let there be wider participation, I don't want to monopolize all the answers. So yeah, go ahead.

S

Swaminathan7:14:18

See, as far as the transmission in a hiking phase, as we have always seen in the past, the rates on deposit side resets much faster and they get passed on. And as we have seen, deposit rates have almost played out. While on the lending side it does take time to pass for two critical reasons in our assessment. There are two major reasons. One is that the proportion of loans that are benchmarked externally, what we call EBLR linked loans, is still less than 50%. So where the transmission could be instant is only where the EBLR comes into play. In case of other instruments, other benchmarks like MCLR or base rates or fixed rate loans, it does take time to transmit. So that is the precise reason why we still see that transmission is fully not in place. The second, also in a hiking phase, we have seen banks in their anxiety to maintain their market share in the incremental credit also adjust their margins so as not to lose their market share in the incremental credit. So that also impedes a complete transmission in terms of the effective interest rate. So I hope as we understood from the context of these two parameters.

M

Michael Patra7:15:38

Anything you would like to supplement? No.

Y

Yogesh7:15:40

Yeah, I'll move on to Mr. Anun Mishra from ET Now.

A

Anun Mishra7:15:47

Thank you sir. I would like to ask a question once again on the Paytm issue. We understand there has been meeting with the Paytm officials and Reserve Bank of India and what transpired in that. I don't want to know the exact details but from the financial system point of view, the company has been claiming that they have taken all the remedial measures and all the efforts are being made so that there is minimal or no impact on customers. So from that point of view, is there any remedial measure which has been suggested by Reserve Bank of India?

S

Swaminathan7:16:28

This is again a matter of bilateral discussion so I don't think that will be proper for us to discuss it in this forum. So as I said, discussing on individual entities will not be very proper, giving granular details in this matter. So we are seized of the issue and as we take steps we will keep the media and public certainly informed.

S

Shaktikanta Das7:16:54

Thank you. You see, as the Deputy Governor has already commented, sufficient time, I'm again saying in a general sense not specific to this case, we give sufficient time to every regulated entity, every entity that is supervised by the Reserve Bank to comply with the regulatory requirements. We give sufficient time and sometimes as he pointed out, sometimes it may even look more than sufficient time. And we would not like to act, you know, we are a responsible regulator, we are a responsible supervisor. If everything had been complied, I'm talking about in a general sense, why should we act? I mean after all we have a responsibility, RBI is a responsible institution. So that's how it is.

Y

Yogesh7:17:47

Yeah, thank you sir. Allia Radio.

A

Allia Radio7:18:06

High interest rates, existing customers, or on an average business today. Good afternoon sir.

Y

Yogesh7:18:47

I'll also make an attempt on Paytm. DG Swaminathan talked about this persistent non-compliance and he also said in such cases months and years of bilateral engagement. My question is why did RBI not consider appointing a director on the board of Paytm when you knew about these persistent non-compliance issues?

S

Swaminathan7:19:12

See, as a regulator we have various tools in the kitty and it's not necessary that every single tool will be deployed in every single situation. We make our own assessment to the scale and proportionate of the issue as well as the tool that we will have to use at different points in time. So one size fits all kind of solution may not work in such situations. So I would like to stop there rather than trying to elaborate on that. We may use certain tools, may not use certain tools, but it is after a due consideration that we do.

Y

Yogesh7:19:46

Thank you. Thank you sir. I'll move on to Mr. Anil Roy from Bloomberg.

A

Anil Roy7:19:51

Thank you sir. Sir, the budget was non-inflationary and the government really brought down the fiscal deficit etc. and the bond yields have fallen. So the government probably wants interest rates to come down but RBI probably is keeping interest rates high. You're saying the transmission is not complete etc. Is there a lack of coordination sir?

S

Shaktikanta Das7:20:13

No, I mean, has the government said anywhere that they want the interest rates to be brought down? So therefore it's a very speculative proposition so I cannot reply to that question.

Y

Yogesh7:20:26

Thank you, thank you sir. I'll invite Shama Mishra from Dainik Bhaskar.

S

Shama Mishra7:20:33

Good afternoon sir. Sir it's again on Paytm. The situation as we describe it, Paytm is known as one of the pioneers of fintech. Coming to this situation, do you see this as a worrisome situation for the entire sector and what lesson would you like to highlight for any similar future companies?

S

Shaktikanta Das7:20:56

Now let me sort of provide some broad guidance on this Paytm issue because there have been at least four or five questions till now and there could be many more questions. So let me put the record straight. Now you said that worry about the system and all that, there is no worry about the system at the moment. Here we are talking about a specific institution, a specific payment bank. As the Deputy Governor Swaminathan has already explained, he has provided several details. Similarly, I also don't want to comment on a specific case, but in this context I would like to make some general observations, not with specific reference to Paytm as such, but some general observations which includes all our regulated entities. So all our regulated entities, it does not exclude Paytm, it is applicable to all the regulated entities. And in fact, this which one... no no no no, the advice is the camera should not focus on this because I have written so many things, these are private parts, so the cameras can focus perhaps on my face. So but let me thank you, I think that's very agile on his part. So let me focus on some, make some general points and I would like to make about six or seven points. Now first is that over the last few years as all of you are aware we have significantly deepened our supervisory systems, approach and methods. Number two, our emphasis is always on, as the Deputy Governor has pointed out, our emphasis is always on bilateral engagement with the regulated entity and we in that engagement we give focus on and we are completely focused on nudging the regulated entity to take corrective action. Let me rephrase it, our emphasis is always on bilateral engagement with the regulated entities with focus on nudging them for corrective action and sufficient time is given for undertaking such corrective action. The third point, when such constructive engagement which we undertake, when that does not work, so when such constructive engagement does not work or when the regulated entity does not take effective action, we go for imposing supervisory or business restrictions. Number four, such restrictions which we impose are always proportionate to the gravity of the situation. Please take note that such restrictions are proportionate to the gravity of the situation. Number five, all our actions being a responsible regulator, being a responsible supervisor, all our actions are in the best interest of systemic stability and protection of depositors or customers' interest. These aspects cannot be compromised. Individual entities should be mindful of these aspects for their long-term success. Number six, over the last few days we have received a lot of queries, clarifications from various quarters including members of the public. You have raised a few questions today, so we have noted all these questions and clarifications which have been sought from us and based on that we will be issuing a FAQ sometime next week. So that should address all these questions and clarifications which are being raised by you and which have been raised in the public domain and raised bilaterally with us from various quarters. Number seven, finally and emphatically, let me stress and let me emphatically state that the Reserve Bank is and will continue to encourage and support innovation and technology in the financial sector. Let there not be any doubt about Reserve Bank's commitment to promote fintech, to promote innovation, to promote technology in the financial system. Thank you.

Y

Yogesh7:26:14

Thank you, thank you sir. I will move on to Mr. D.H. Krishan from Moneycontrol.

D

D.H. Krishan7:26:20

Thank you Yogesh. Thank you Governor. I have a very short related question sir.

You in your remarks you stressed about the good governance and sound complaints and this is not something that you speaking for the first time you have been emphasizing this part and the role of the boards in the regulated entities is extremely critical as you have pointed out what is your view on the role of the Paytm board because it didn't happen all of a sudden since 2021 RBI has been alerting the regulatory breaches and as per the process the RBI on-site inspection report is passed to the ACB and the board for corrective actions so probably if they had acted on time things would not have worsened to this level so why is the regulator silent on the role of the board while the reasons for this action is quite evident?

S

Shaktikanta Das7:27:14

You see typically we do not share such granular information. We have been engaged with the institution, with the entity for quite some time and within that with whom we interacted and how it was, such granular details it will not be appropriate on our part to share those details.

Y

Yogesh7:27:39

Thank you sir. I'll move on to Mr. Vishwanath N from NDTV Profit.

V

Vishnath7:27:45

Hi sir, thank you so much. I'll give a little respite and move toward another topic but on CBDCs you're talking about introducing additional programmability.

S

Shaktikanta Das7:27:54

No, we don't need any respite. The topic of... go ahead but the point is you know the same question is coming up and also in as much as we are issuing a FAQ so I would request if you have still some clarification or something on which you want clarity I think you can send it bilaterally to us directly. You can mail it to us we will see to what extent we can address that question.

V

Vishnath7:28:20

Yeah sure. My question is with regard to the additional programmability that you're proposing to bring in with respect to the CBDC pilot. The question has been there since the beginning when this topic was... DJ Rishankar had introduced. Doesn't this go against the fungibility of money? If the intent is to make CBDC the equivalent of paper currency and if you introduce specific restrictions on usage does the fungibility factor not go opposite to that?

S

Shaktikanta Das7:28:46

No we are not imposing a restriction. I think we are making it more flexible but let DJ Rishankar take that question.

R

Rishankar7:28:56

Thank you. Shifting to me, so I'll give a more formal answer. I think the best way to think about it is when a family puts some currency notes in a package to be used for let's say groceries during the month doesn't mean that the fungibility of the currency is lost. It's just that until that spending happens it can be used for no other purpose. I'm just giving you as an example to be able to think on what we mean by fungibility, what we mean by programmability. When you do programmability for a moment fungibility is on hold. We have to realize that it's a facility that we are providing the currency. Again by way of an example let's suppose that a school has given some money to a student who won a prize to buy books in a particular shop so the student can only use this money to buy books in that shop that's intended. Supposing the student goes and buys that book he cannot use it for any other purpose. As soon as the book is purchased and the currency goes to the book shop owner it again becomes fungible. So it's only for that period that fungibility is limited. Supposing he doesn't spend it goes back to the school fungibility is restored. So it is a way of controlling expenditure that you do not get unless it's digital and that you do not get unless it's a token. It's a facility that is there we'll use and the facility will typically be agreed by both the recipient as well as the person who puts that condition. So no, to give a very short answer it doesn't militate against the... programmability doesn't militate against fungibility. It's only a specific use binding.

S

Shaktikanta Das7:30:54

Thank you. And to extend that reply further, imagine a situation where later on when CBDC is fully implemented at a later date if the government wants to give some cash support to certain individuals for a specific purpose programmability will be useful in such situations so that the money, the cash which is going from government to such persons can be used for specific purposes. So therefore it's typical for every household in the beginning of the month to do their own budget and set aside money, one envelope for school fees, one envelope for electricity bills and it happens. It's a common thing which happens in large number of households.

Y

Yogesh7:31:46

Yeah, next. Thank you sir. I will request Manojit Saha from Business Standard.

M

Manojit Saha7:31:52

Thank you sir. So I again go back to the para 21 on liquidity. So you said stance is with respect to rates and incomplete transmission. Does that mean that you creating elbow room to do liquidity operations, OMO purchase to infuse liquidity because March is going to be very tight and then such liquidity operation will not be seen out of sync with the stance. So you're separating the stance from liquidity management and you're saying it is only on rates. Does that give you a room to do OMO purchase when liquidity will be very tight in March?

S

Shaktikanta Das7:32:32

You see what we have attempted to do today is to clarify and clearly state that do not read the stance of monetary policy in terms of excess liquidity prevailing or deficit liquidity prevailing. That's not the point. Liquidity plays a secondary role to support monetary policy transmission. That is there is a monetary policy, there is a repo rate, liquidity situation in the market. I think that is what the Deputy Governor said in the beginning itself. You clarified that we try to keep the liquidity at a level wherein the overnight call rate which is the operating target of monetary policy remains around the repo rate. In the first part of this year due to various exogenous factors there was lot of liquidity so we conducted sort of repo auctions, variable rate repo auctions but market took time to adjust. And market also, banks, individual banks make their own analysis of the liquidity situation and that analysis by the banks also varies within a day. You look at yesterday or was it day before we did two VRR auctions. The response to the first one was very low I think some 4,000 crores but then we same day we did one more and we got a response of 27,000 crores. So between morning auction when the banks offered 4,000 crore and to a subsequent auction in the afternoon the banks offered 27,000 crore. So therefore due to various autonomous factors liquidity situation has been fluctuating in the market. Banks make their own assessments. Banks also take their own decisions. Markets and banks, meaning the banks and the markets take time to adjust to the evolving liquidity situation. So far as the RBI is concerned we will remain active, we will remain nimble in our liquidity management. What instruments we will utilize that will depend on the prevailing situation which will come up from time to time. I cannot say that we will use this and not use this. We have several instruments at our disposal depending on situation we will use the most appropriate instrument.

Y

Yogesh7:35:27

Also let me ask one thing very straight. Other people also so I'll move on to Mr. Brajesh Kumar from Z Business News.

S

Shaktikanta Das7:38:07

You know let us be very clear the bank's terms and conditions are very transparent in the sense that all information is given but experience... purely in customers interest and I'm sure banks will encourage it because the banks also are interested in the banks are long-term players so they are not short-term operators.

Y

Yogesh7:39:07

Thank you. P. Shukla from Financial Express.

P

P. Shukla7:39:11

Good afternoon Governor sir, DGs, Yogesh sir. Just taking you back to where we started. DG said that there are various tools in kitty with regard to Paytm how the future course of action will be taken. Sir very specifically banks are becoming very hesitant to actually partner with this bank, Paytm Payments Bank for shifting their customers and their merchants in one go. They are saying that we need regulatory approval for that so will you provide that and will you allow the sale of their wallet to other potential payments bank?

S

Swaminathan7:39:50

See it will be very difficult to provide any hypothetical answers at this point in time. So as I said that there's still time that is provided for customers to continue to access the services that is provided. So during this period we will see what else needs to be done and keeping as Governor also said that we keep the customer in the center of what needs to be done so we will take appropriate steps. The second part of your question in terms of what the other banks will have to do each of them it's a business decision they have got to carry out the required due diligence as per their laid down board approved policies and I'm sure that they will carry out that if they have got to do a partnership. So that's something which we will not comment at this point in time but what tool and shape it will take is not something which we would like to speculate at this point in time. We may wait for the FAQs which will give you more clarity.

P

P. Shukla7:40:45

Sorry so banks don't need regulatory approval for taking on board the Paytm customer?

S

Swaminathan7:40:51

It's very specific to a particular item. I think it's better for you to wait for the FAQ. Please be patient let the FAQ come next week.

Y

Yogesh7:41:02

Okay thank you sir. I'll move on to Saat Ch from Reuters.

S

Saat Ch7:41:05

Thank you sir. Governor today you've said that next year's growth is projected at 7%. Nominal GDP growth as per the budget is projected at 10.5%. I mean I don't know if my maths is wrong but effectively that would mean inflation is at around 3.5% next year. Is that right? Are you being a bit too optimistic about growth or is the government underplaying growth and being very modest in their projections?

S

Shaktikanta Das7:41:27

Thank you. So I think you take that question because he likes to play these balls. No I will not venture to answer for the government but my understanding of this is that what goes into the nominal GDP is not CPI inflation it's the GDP deflator. And GDP deflator is always a weighted combination of CPI and WPI. Now the WPI has been in deflation for most part of this year and is just emerging out of deflation so that must be the reason.

Y

Yogesh7:41:59

Thank you sir. I'll move on to Mr. Mayur Shetty from Times of India.

M

Mayur Shetty7:42:05

Governor in the development measures you spoke about reviewing the AEPS and some banks have come out with warnings on how fingerprints can be cloned using silicon. Is that what's caused this thing? And also since OTP is also being reviewed does it mean that the traditional forms of KYC are the best option for regulated entities?

S

Shaktikanta Das7:42:32

No, OTP is not being reviewed. What I'm saying is that over the years it so happens that OTP has become the most popular and commonly used AFA, you know that additional factor of authentication. But with the movement of time various other technologies and methods have come up so we want to just tell the players in the field that there are other methods also and RBI will be agnostic to them as long as they are sound methods. The banks and institutions are free to adopt them. But I think let DJ Rishankar take the other part of the question with regard to the other AEPS.

R

Rishankar7:43:18

Yeah you sort of gave the answer in your question itself. It's basically to ensure that since this is being used in rural and such areas a lot it's important that the safety of these transactions is ensured. Now with the passage of time as in the case of additional factor of authentication we can use various technologies to do it. So that is essentially the position here. All touch point operators will go through a standardized safe and secure onboarding process. We can add other factors into it for example the switch on has to be done by the customer instead of it being pre-available on the system or it can have geo limits beyond which it cannot operate. Whatever is required for the customers the idea is that as Reserve Bank has always been placing a lot of emphasis on the security of digital transactions which we believe is key to ensuring customer adoption especially customers who are not savvy digitally. But this is an effort in that direction to improve the security of transactions.

Y

Yogesh7:44:37

Thank you sir. I'll move on to Mr. Hesh Yas from Indian Express.

H

Hesh Yas7:44:43

Hi sir good afternoon sir. There is an expectation that the stance would be changed to neutral. Sir what are the preconditions for stance to become neutral?

S

Shaktikanta Das7:44:56

I cannot give a forward guidance on that. I think when such a thing happens we will explain how it is. But you see I'll tell you the situation, evolving situation continues to be very volatile and uncertain. You look at the commentaries coming out from the central banks mostly of advanced countries. Sometimes they appear to be giving a forward guidance in one particular direction sometimes the market interprets the next guidance to be in a different direction. So therefore at the moment we are not giving any forward guidance with regard to stance or rate. When we will, you know market is there's a talk of when the central banks world over will cut rates. And as I have said markets are overshooting, running ahead of the central banks. So I think preconditions I will not be able to specify unless Dr. Michael Patra wants to comment anything on that. Because these are very volatile times and so therefore it's better to wait and when something like that happens we will explain it appropriately.

Y

Yogesh7:46:19

Thank you sir. I'll move on to Miss Gopika Gupta Kumar from The Mint.

G

Gopika Gupta Kumar7:46:24

Thank you Yogesh. Good afternoon Governor. Considering that your inflation forecast for next year is at 4.5% and GDP at 7% and you're saying that RBI needs to be vigilant in the last mile of disinflation does it rule out a rate cut in FY25? And secondly on the Paytm issue the what is the larger issue is it the KYC or is it something related to the ownership or interlinkage between a regulated and a non-regulated entity? Because if it is KYC then does RBI need to relook at the minimum regulations around the minimum KYC accounts? That is my second question.

S

Shaktikanta Das7:47:03

No you know again an entity specific details we would not like to spell out. And let me leave it at that because I cannot really share. It's a bilateral engagement between the RBI and the regulated entity. The regulations are there in their place. The regulations are robust. There is no need for... it is not a case where there was a regulatory deficiency or there was a regulatory correction required. It's an issue of compliance. Compliance with various parameters. You mentioned about KYC but compliance with so many aspects. Again let me not specify the details. So regulations are there, regulations are robust and it's a question of... it's a situation where we are focused on the compliance not being there with the regulatory requirements.

G

Gopika Gupta Kumar7:48:06

Thank you sir. The first question, sorry first question on the rate hike and the pause.

S

Shaktikanta Das7:48:11

I cannot say that. I think only time will tell. Only time will tell when something like that will happen.

Y

Yogesh7:48:21

Thank you sir. Last few questions we will take. Shesh from Swadesh.

S

Shesh7:48:29

Namaste sir. Thank you Yogesh sir. Namaste sir.

S

Shaktikanta Das7:51:16

Specifically effective action, interest, customer interest, depositors interest, overall financial system, financial stability or financial system custodian. Reserve Bank is... thank you.

Y

Yogesh7:52:02

Siti Bat from Inist Media and then Anika from Hindu Business Line. Two questions, last two questions.

S

Siti Bat7:52:10

Good afternoon Governor. So public debt has been high for 3 years now because of spending by governments across the world. So what risks does RBI see specifically now to raise this as a risk factor and what are the spillover risks for this for India?

S

Shaktikanta Das7:52:29

You see I was raising it in a global context not in the context of India. The India part of the information I have given just by way of information but my reply was in the global context. You see the footnotes of my monetary policy statement all the supporting data is given. By the end of this decade global debt to GDP of advanced economies all put together is expected to exceed 100%. As to on today's date and in future very surprisingly you will notice that the debt to GDP of the advanced economies are actually much higher than the debt to GDP levels of the emerging market economies. Or money you know what you call as creating new money, printing notes. So therefore these are kind of things you know if the debt has to be sustainable for the long-term stability of the global financial system. So therefore I have raised this as an issue which can become a future source of stress to the global financial system. So far as India is concerned you please again look at my statement I provide the data in the footnote. The IMF fiscal monitor gives out the data for India. The debt to GDP for India had gone up to 88%, general government, states and center had gone up to 88% during the COVID year of 2020 because of the various fiscal measures which were undertaken. And it projects how by 2028 it's likely to... it has already come around about 81% or so. By 2028 according to the IMF fiscal monitor it is expected to be around 80% or so. So that is the path which I just mentioned by way of information.

Y

Yogesh7:54:56

Thank you sir. Anika last.

A

Anika7:55:01

Hi sir good afternoon. So this is not about Paytm but about UPI. Basically there were talks about restricting, capping the market share of each app in terms of the UPI transaction volume share. We've seen the deadline was extended and the market share has only gone up for these platforms. Now that we're seeing the Paytm migration happen to some of these platforms like Google Pay and PhonePe their market share is only increasing. Is there a concern regarding over-reliance on a few specific platforms and does that raise the risk of them becoming too big and could the RBI then look at a structure of systemically important PA entities or something like that? And because I'm the last person just one small clarification. You mentioned the overnight two VRRs in the day to bridge. Is there a specific amount or range that the RBI has in mind that you would prefer that banks not park their funds beyond that in SDF?

S

Shaktikanta Das7:55:56

I think DJ Rishankar followed by DJ Michael Patra. Two questions but you said last person so the last mile in the queue should always have priority. So last person so I think DJ Rishankar followed by Michael Patra.

R

Rishankar7:56:13

Yes since it's the last question I'll keep it very short. The limit is from the point of view of diffusion of risk in case some entity does become unavailable for whatever reason at any point in time. But to take it to too big to fail sort of is probably not appropriate here because they are just third party app providers. The limit of 30% funds don't go through them so the system is not threatened except that there could be a temporary inconvenience in terms of shift over to an additional system. Having said that it will be for the market to decide. The market forces have to play out such that this percentage is more evenly decided. We will not be interfering in the market process to ensure that the 30% or something is... in any case it's an NPCI requirement. We'll have more players to come in hopefully with technology we'll get some more players and that percentage can be maintained. We have time till the end of this year anyway.

M

Michael Patra7:57:19

Yeah we don't have any preconceived limit on how much they put in SDF. The SDF by its very nature is a standing facility and it's at the discretion of market participants as to how much they want to use. As to why we did two VRR during the day we assess market conditions and bidding behavior. And we've... in the first we realized that there were bids which were higher than the amount we offered. We offered 50 we got a lot more so we thought that probably they would like to park more in the VRR which is more remunerative than the SDF and so we did the second.

S

Swaminathan7:58:03

Yeah I think DJ Swaminathan wants to just one clarification on because the question came around the UPI apps. See this particular action is against the payment bank. It's not to do with, not to be confused with the payment app which is done right. That's okay we will clarify through the FAQs but just to clarify in terms of your question just as a supplemental information that as an app is not impacted by this action.

Y

Yogesh7:58:34

Hello everyone and welcome to this post policy press conference. With us today we have respected Governor Shaktikanta Das. I had said last time just say Governor. Okay sir we have Shri Shaktikanta Das Governor Reserve Bank of India with us along with Dr. Michael Patra, Shri M. Rajeshwar Rao, Shri T. Rabi Shankar and Shri Swaminathan J. Along with us also are executive directors Dr. O.P. Mal and Dr. Rajiv Ranjan and my colleague from MPD and the Secretariat. So we have 22 media persons present here and as is our want we will first go with your opening remarks and then we'll go for the press conference. Over to you sir.

S

Shaktikanta Das7:59:23

Thank you for being here. Good morning. You have already heard the statement it's been uploaded also. I just in the as a part of initial remarks I would like to make nine points. First domestic economic activity continues to be strong. We expect the real GDP to grow by 7% in the next financial year 24-25. Second point CPI inflation is moderating with intermittent interruptions and spikes. We have to remain vigilant about the incoming data and the outlook. Our endeavor to achieve 4% inflation on a durable basis has to continue. Third globally markets are front running central banks in anticipation of policy pivots but central banks remain apprehensive and await a more durable alignment of inflation with the targets. Four liquidity will be actively managed by the Reserve Bank. Five our multi-pronged proactive and calibrated policies have worked well to maintain and strengthen macroeconomic and financial stability. Six systemic sectoral and institution specific signs of stress are being proactively monitored and acted upon wherever necessary. Seven let me reiterate that good governance, robust risk management, sound compliance culture and protection of customers interest are the hallmarks of the Reserve Bank's approach to the safety and stability of the financial system and individual financial institutions. Regulated entities must accord the highest priority to these aspects. This is the seventh point. The eighth point is the external sector of the economy remains resilient. The current account deficit is expected to be eminently manageable. Nine the exchange rate of the Indian rupee has remained stable. Thank you.

Y

Yogesh8:02:07

Thank you sir for those opening remarks and may I request all of you to wait for your turn to be called and request also to stick to one question and if we have time we'll go for the other or second or third question. So I'll begin by inviting L. Venkatesh from CNBC TV8.

L

L. Venkatesh8:02:28

Thank you Governor. Thank you Yogesh. Well sir I'm a little confused. I mean confusion about whether you are distinguishing between liquidity and your stance. You have mentioned in three places that the entire hike has not been fully transmitted so I assume you want more hike transmitted. But separately you have said that you will manage liquidity para 21 in great detail that you will manage liquidity with a bunch of instruments. Should we understand therefore that unlike the majority of the last 5 months when call was closer to 6.75 you will be more like you were in the last one week where you will give long-term liquidity through VRR repo and adjust for short-term which is keep call rate closer to 6.5. Is that what you are trying to say? That I'll do that but I want more interest rate hikes to happen. And sir since you have dwelt twice on this good governance I must add are you trying to say that you will not give Paytm any further timeline to set them right? Does Feb 29 stand? Is that what we... there two questions actually.

S

Shaktikanta Das8:03:44

Two questions so please ask one question each. The first part of the question I would request Deputy Governor Michael Patra to reply. The second part I would request Deputy Governor Swaminathan to reply. Go ahead.

M

Michael Patra8:03:58

As Governor has clarified in his statement the stance is all about the future course of policy rates. Sorry. Now liquidity is endogenous to the rate. When the rate is the chief instrument of monetary policy liquidity follows the rate. You have to move liquidity to achieve a certain rate. So our objective is to keep the repo rate, keep the weighted average call rate around the repo rate. But there are times when there are temporary drivers of autonomous liquidity like government balances which go through tectonic shifts and market participants take time to adjust. Even they are unsure about the future direction of this. So that is why sometimes the call rate goes to where it went. But you saw that we were nimble in our actions and we brought it down to the repo rate. That is our endeavor.

L

L. Venkatesh8:04:52

You were nimble after five months so I'm asking will you be like the previous five months or will you be like the last five days?

M

Michael Patra8:04:58

No that is not correct because at the time when the rates were up we allowed market participants to take what liquidity they wanted from us through our standing facilities and we did the main operation every 14th day. So it was not that we let it go but it was the market participants still you saw the reactions of the VRR they were unwilling to let go because they were unsure about how balances will move.

S

Swaminathan8:05:30

Yeah see as you know as a matter of policy we don't comment on individual entity or actions that we initiate in such cases. But that anyway since this question is on the uppermost of mind of most of you I think I would like to say two-three things essentially to set the context. While we don't want to be discussing the individual details here because that will not be proper in terms of context as you all know that this is a supervisory action on a regulated entity for a persistent non-compliance. Second such supervisory actions are invariably preceded by months and at times years of bilateral engagement where we are not only pointing out the deficiencies but also provide more than adequate time for them to take corrective action. Third of course is in terms of as a regulator it's incumbent upon us to protect the interest of the ultimate consumer and thereby protecting the stability of the financial system. So these actions have to be seen in that particular context. Coming to the second part of your question what lies ahead you know as part of MPC we don't give a forecast in these matters. So I think you will have to wait and of course we have been... what feedback we have been getting we'll work on and as a responsible regulator suitable steps will be taken to ensure that the customer inconvenience if any is minimized. So we will take care. I think with that we can give a rest to this question and then move on to MPC is my request.

Y

Yogesh8:07:09

Thank you sir. I'll move on to Mr. Gaurang Rangan from Economic Times.

G

Gaurang Rangan8:07:13

Thank you sir. Good afternoon Governor. For the rate decision rather I would say the status quo you specifically mentioned that the transmission of 250 basis points is still continuing. So the bankers say that the deposit rates have already gone up by 250 basis points and the lending rates have also gone up. So what in your mind is the actual transmission that has not happened and how much is that and what is the benchmark that you're looking at to conclude that the transmission has happened?

S

Shaktikanta Das8:07:48

Okay again you know like the previous questions I would request I think DJ Swaminathan supplemented by DJ Michael Patra to reply to that question. Let there be wider participation. I don't want to monopolize all the answers. So yeah go ahead.

S

Swaminathan8:08:03

Yeah see as far as the transmission in a hiking phase as we have always seen in the past the rates on deposit side the resets much faster and they get passed on and as we have seen repo rate hikes have almost played out. While on the lending side it does take time to pass for two critical reasons in our assessment. There are two major reasons. One is that the proportion of loans that are benchmarked externally what we call EBLR linked loans is still less than 50%. So where the transmission could be instant is only where the EBLR comes into play. In case of other instruments other benchmarks like MCLR or base rates or fixed rate loans it does take time to transmit. So that is the precise reason why we still see that transmission is fully not in place. The second also in a hiking phase we have seen banks in their anxiety to maintain their market share in the incremental credit also adjust their margins so as not to lose their market share in the incremental credit. So that also impedes a complete transmission in terms of the effective interest rate. So I hope as we understood from the context of these two parameters.

M

Michael Patra8:09:25

Anything you would like to supplement? No.

Y

Yogesh8:09:27

Yeah I'll move on to Mr. Anun Mishra from ET Now.

A

Anun Mishra8:09:34

Thank you. I would like to ask question once again the Paytm issue. We understand there has been meeting with Paytm officials and India and what transpired in that I don't want to know the exact details but from the financial system point of view the company has been claiming that they have taken all the remedial measures and all the efforts are being made so that there is minimal or no impact on customers. So from that point of view is there any remedial measure which has been suggested by Reserve Bank of India?

S

Swaminathan8:10:12

I think this is again a matter of bilateral discussion and so I don't think that it'll be proper for us to discuss it in this forum. So as I said discussing on individual entities will not be very proper giving granular details in this matter. So we are seized of the issue and as we take steps we will keep the media and public certainly informed.

S

Shaktikanta Das8:10:37

Thank you. You see as the Deputy Governor has already commented I mean sufficient I'm again saying in a general sense not specific to this case we give sufficient time to every regulated entity every entity that is supervised by the Reserve Bank to comply with the requirements, the regulatory requirements. We give sufficient time and sometimes as he pointed out sometimes it may even look more than sufficient time. And we would not like to act you know we are a responsible regulator we are a responsible supervisor. If everything had been complied I'm talking about in a general sense why should we act. I mean after all we have a responsibility we are a responsible institution RBI. So that's how it is.

Y

Yogesh8:11:35

Yeah thank you sir. Allia Radio.

A

Allia Radio8:11:37

Namaskar sir.

S

Shaktikanta Das8:12:31

Thank you. Good afternoon sir. I'll also make an attempt on Paytm. DJ Swaminathan talked about this persistent non-compliance and he also said in such cases months and years of bilateral engagement. My question is why did RBI not consider appointing a director on the board of Paytm when you knew about this persistent non-compliance issues?

S

Swaminathan8:12:56

See as a regulator we have various tools in the kitty and it's not necessary that every single tool will be deployed in every single situation. We make our own assessment to the scale and proportionality of the issue as well as the tool that we will have to use at different points in time. So one size fits all kind of solution may not work in such situations. So I would like to stop there rather than trying to elaborate on that. We may use certain tools may not use certain tools but it is after a due consideration that we do.

Y

Yogesh8:13:33

Thank you sir. I'll move on to Mr. Anil Roy from Bloomberg.

A

Anil Roy8:13:36

Thank you sir. Sir the budget was non-inflationary and the government really brought down the fiscal deficit etc and the bonds have fallen so the government probably wants interest rates to come down but RBI probably is keeping interest rates high. You saying the transmission is not complete etc. Is there a lack of coordination sir?

S

Shaktikanta Das8:13:57

No I mean has the government said anywhere that they want the interest rates to be brought down. So therefore it's a very speculative proposition so I cannot reply to that question.

Y

Yogesh8:14:13

Thank you sir. I'll invite Shama Mishra from Dainik Bhaskar.

S

Shama Mishra8:14:17

Good afternoon sir. So it's again on Paytm. The situation as we describe it that Paytm is known as one of the pioneers of fintech coming to this situation do you see this as a worrisome situation for the entire sector and what lesson would you like to highlight for any similar future companies?

S

Shaktikanta Das8:14:41

Now let me sort of provide some broad guidance on this Paytm issue because there have been at least four or five questions till now and there could be many more questions. So let me put the entire thing, let me put the record straight. Now you said that worry about the system and all that there is no worry about the system at the moment. Here we are talking about a specific institution, a specific payments bank. As the Deputy Governor Swaminathan has already explained he has provided several details. Similarly I also don't want to comment on a specific case but in this context I would like to make some general observations. Not with specific reference to Paytm as such but some general observations which includes all our regulated entities. So all our regulated entities does not exclude Paytm it is applicable to all the regulated entities. And in fact this... no no no the advice is the camera should not focus on this because I have written so many things these are private parts so the cameras can focus perhaps on my face. So but let me thank you I think that's very agile on his part. So let me focus on some, make some general points and I would like to make about six or seven points. First is that over the last few years as all of you are aware we have significantly deepened our supervisory systems approach and methods. Number two our emphasis is always on as the Deputy Governor has pointed out our emphasis is always on bilateral engagement with the regulated entity. And in that engagement we give focus on and we are completely focused on nudging the regulated entity to take corrective action. Let me rephrase it for you to make note our emphasis is always on bilateral engagement with the regulated entities with focus on nudging them for corrective action and sufficient time is given for undertaking such corrective action. The third point when such constructive engagement which we undertake when that does not work, so when such constructive engagement does not work or when the regulated entity does not take effective action we go for imposing supervisory or business restrictions. Number four such restrictions which we impose are always proportionate to the gravity of the situation. Please take note that such restrictions are proportionate to the gravity of the situation. Number five all our actions being a responsible regulator being a responsible supervisor all our actions are in the best interest of systemic stability and protection of depositors or customers interest. These aspects cannot be compromised. Individual entities should be mindful of these aspects for their long-term success. Number six over the last few days we have received a lot of queries clarifications from various quarters including members of the public. You have raised a few questions today so we have noted all these questions and clarifications which have been sought from us and based on that we will be issuing a FAQ sometime next week. So that should address all these questions and clarifications which are being raised by you and which have been raised in the public domain and raised bilaterally with us from various quarters. Number seven finally and emphatically let me stress and let me emphatically state that the Reserve Bank is and will continue to encourage and support innovation and technology in the financial sector. Let there not be any doubt about Reserve Bank's commitment to promote fintech to promote innovation to promote technology in the financial system.

Y

Yogesh8:20:01

Thank you sir. I will move on to Mr. D.H. Krishan for Moneycontrol.

D

D.H. Krishan8:20:04

Thank you Yogesh. Thank you Governor. I have very short related question sir. You in your remarks you stressed about the good governance and sound complaints and this is not something that you speaking for the first time you have been emphasizing this part and the role of the boards in the regulated entities is extremely critical as you have pointed out what is your view on the role of the Paytm board because it didn't happen all of a sudden since 2021 RBI has been alerting the regulatory breaches and as per the process the RBI on-site inspection report is passed to the ACB and the board for corrective actions so probably if they had acted on time things would not have worsened to this level so why is the regulator silent on the role of the board while the reasons for this action is quite evident?

S

Shaktikanta Das8:20:57

You see typically we do not share such granular information. We have been engaged with the institution with the entity for quite some time and within that with whom we interacted and how it was such granular details it will not be appropriate on our part to share those details.

Y

Yogesh8:21:23

Thank you sir. I'll move on to Mr. Vishwanath N from NDTV Profit.

V

Vishnath8:21:25

Hi sir. Thank you so much. I'll give a little respite and move to another topic but on CBDCs you're talking about introducing additional programmability.

S

Shaktikanta Das8:21:38

We don't need any respite. The topic of... go ahead but the point is you know the same question is coming up and also in as much as we are issuing a FAQ so I would request if you have still some clarification or something on which you want clarity I think you can send it bilaterally to us directly. You can mail it to us we will see to what extent we can address that question.

V

Vishnath8:22:05

Yeah sure. My question is with regard to the additional programmability that you're proposing to bring in with respect to the CBDC pilot. The question has been there since the beginning when this topic was DJ Rishankar had introduced. Doesn't this go against the fungibility of money? If the intent is to make CBDC the equivalent of paper currency and if you introduce specific restrictions on usage does the fungibility factor not go opposite to that?

S

Shaktikanta Das8:22:31

No we are not imposing a restriction. I think we are making it more flexible but let DJ Rishankar take that question.

R

Rishankar8:22:40

Thank you. Shifting to me so I'll give a more formal answer. I think the best way to think about it is when a family puts some currency notes in a package to be used for let's say groceries during the month doesn't mean that the fungibility of the currency is lost. It's just that until that spending happens it can be used for no other purpose. I'm just giving you as an example to be able to think on what we mean by fungibility, what we mean by programmability. When you do programmability for a moment fungibility is on hold. We have to realize that it's a facility that we are providing the currency. Again by way of an example let's suppose that a school has given some money to a student who won a prize to buy books in a particular shop so the student can only use this money to buy books in that shop that's intended. Supposing the student goes and buys that book he cannot use it for any other purpose. As soon as the book is purchased and the currency goes to the book shop owner it again becomes fungible. So it's only for that period that fungibility is limited. Supposing he doesn't spend it goes back to the school fungibility is restored. So it is a way of controlling expenditure that you do not get unless it's digital and that you do not get unless it's a token. It's a facility that is there we'll use and the facility will typically be agreed by both the recipient as well as the person who puts that condition. So no, to give a very short answer it doesn't militate against the... programmability doesn't militate against fungibility. It's only a specific use binding.

S

Shaktikanta Das8:24:35

Thank you. And to extend that reply further, imagine a situation where later on when CBDC is fully implemented at a later date if the government wants to give some cash support to certain individuals for a specific purpose programmability will be useful in such situations so that the money, the cash which is going from government to such persons can be used for specific purposes. So therefore it's typical for every household in the beginning of the month to do their own budget and set aside money, one envelope for school fees, one envelope for electricity bills and it happens. It's a common thing which happens in large number of households.

Y

Yogesh8:25:30

Yeah next. Thank you sir. I will request Manojit Saha from Business Standard.

M

Manojit Saha8:25:36

Thank you sir. So I again go back to the para 21 on liquidity.

RBI Policy Decision LIVE | RBI Addresses The Media Post Monetary Policy | Shaktikanta Das | N18L

About Shaktikanta Das