LIVE | Indian Economy & Financial Sector Is Well Placed: RBI Governor Shaktikanta Das | CNBC TV18

Thank you very much to Business Standard for inviting me to this very prestigious event. I think it has become a landmark event in the various financial sector discussions and policy forums that have been established. I would like to also take this opportunity to compliment Business Standard for attaining their 50th year. I think this is the 50th year. I just got a glimpse of the earlier editions of Business Standard started in 1975, and my congratulations to the entire team of Business Standard for their journey over the last 50 years. Now coming to your question, you know, Tamal is a very clever bowler. When you say you know, why do you know? Some batsmen, I'm not saying I'm a great batsman, certainly not, but some great batsmen, you know, they get out to a bowler who appears to be ordinary, but not actually ordinary, because you tend to become casual, you tend to go out and hit, and in the process you get caught. So never underestimate the bowler is the principle. Never underestimate the person who's interviewing you, because you will stumble at a point when you become overconfident. But anyway, on a serious note, thank you Tamal for this interaction. I think I have been having this interaction with you over the last four or five years. This is the fifth year now. You see, there are two major international events which were awaited by the markets, the financial markets in particular. One was the US elections, the outcome of the presidential elections in the US. Second, the announcement from China about the fiscal policy support that Chinese authorities are expected to announce, which they have said that they will announce. Now, depending on the size and the depth of the Chinese policy announcement, what it means for the Chinese economy, what it means for the rest of the global economy in terms of Chinese demand, in terms of its contribution to global slowdown of global growth or giving additional momentum to global growth, so that is one event which is awaited keenly over the last few days or weeks. The other one is of course the US elections, which are, I think the results are coming out, but in an election, I think it's always better and prudent to wait till the entire counting process is over, because till the end it can go either way. So therefore I don't want to comment who's going to win or what will be the eventual outcome. I will refrain from doing that. But two things are very clear overall from all respects. I'm not just talking about with regard to the financial sector or the trading sector or the geopolitical in terms of diplomatic relations. I think overall India-US relations have become much stronger. There is a strategic partnership between the two countries, and that will continue irrespective of who wins. Now this is not my domain, but this is what I'm telling you is common sense. The second thing is, irrespective of the global developments, irrespective of the outcome of the US elections and what kind of spillovers it will have for the rest of the world, the Indian economy and the Indian financial sector is today well placed and very resilient to deal with any kind of spillover which is coming from the external world. We are impacted definitely by what's happening in the rest of the world. What is happening there, we are a bystander, we are watching. But when it comes to our domestic market, as a regulator we are not bystanders. We are there very much in the market. And I think our overall financial sector and the overall Indian macroeconomy and macro financial conditions are today very resilient to deal with any kind of spillovers in comparison to many other countries.

There are totally about 9,400 NBFCs. There's a new regulatory architecture for that. We have categorized them on the basis of their scale and complexity. So out of 9,400 all NBFCs, action has been taken against four. So therefore you can see that RBI's action is very calibrated, very selective, and it is taken in a very measured way. Now every such action which is taken is not abrupt, it is not sudden. The action is preceded by months of direct bilateral engagement with the individual entities. We find certain broad deficiencies, certain serious deficiencies. It is pointed out to the institutions. We give them enough time to take the corrective measures. In many cases, the corrective measures are taken and we don't take any action at all. In fact, the number of cases where we found deficiencies and where we did not take any action because the corrective actions were taken and whatever were the regulator's expectations, they were complied with, so the number of cases where we did not take action is actually much larger. Now that doesn't mean that there is something fundamentally wrong with our NBFC sector or the financial sector on the whole. The financial sector, the NBFC sector at the system level remains very robust. It's only in a few cases where we do not see adequate action being taken, or we do not see action being taken in time and it is not up to our expectations or it is getting delayed, only in those cases we take action. And the detailed reasons for the action is always shared with the individual company. It's not as if they are kept in the dark. Action is preceded by bilateral discussion with them, bilateral engagement with them. They know what are the concerns of the regulator. When we take the action, we also share with them formally the details, the reasons as to why we have taken the action, and we point out that these are the areas where we find deficiencies and we would expect you to act. Our action is not punitive, our action is corrective. You would have seen in a number of cases where we have taken action, after 6 months or 8 months, when the compliance is completed, it's 100% or near 100%, and if you are satisfied that the rest of the compliances will be done in the next few weeks or so, we withdraw the restrictions. It is good for the individual institution itself for its sustainability, it is good for the financial sector, and above everything, it is good for the consumer. All actions are taken in the consumer's interest. And communication, Shri Dholakia talked about RBI's communication. You would have seen that the press note which we issue these days when action is taken are fairly explicit. They point out why the action has been taken. So our effort has been to be far more consultative, direct engagement, transparent communication, and measured action. It's not abrupt, it's not arbitrary. You may say I'm being defensive. I'm not, because I think it is necessary in a gathering such an informed and well-informed gathering like this where there are so many participants from the BFSI sector. I think it was very important for me to explain the things in their totality. Sorry for that very long answer, but I think it was necessary to put things in the right perspective.

You see, our action and approach is very nuanced. It's not so much that the credit growth is high or low. We don't have a view on that, whether the credit growth should be this much or the credit growth is high or low. It depends on the situation, the conditions prevailing in each bank. There are opportunities to lend, naturally the banks will lend. After COVID, there was a spurt in consumer demand for retail loans, etc. Naturally the banks and the other lenders will lend where there is an opportunity. There are a couple of things which we always try to monitor. Number one, what is the underwriting standard which the bank or the other lender, the NBFC, what are the underwriting standards? In the banking sector, by and large, I feel that the underwriting standards today in India, there has been considerable amount of improvement. In the NBFC sector also, there has been improvement, but there still we find a few outliers where we feel that the underwriting standards need to be made more robust. So again, at the system level, at the system level there is no issue, let me be very clear. So we always look at what kind of underwriting standards are being followed, whether the underwriting standards are being diluted only to push credit. So that is number one. Second thing is, we also look at the liability side with regard to each and every, you are talking about banks, so I will talk about banks, about each and every banking entity. We look at the liability side also, where the deposits are growing proportionately with their credit growth, because there has to be some correlation between them. And we have not hardcoded that this shall be the CD ratio for the banks. RBI has not prescribed, and it's not there, there is no hard coding. But this is something which I think every bank, every banker understands that the CD ratio cannot be completely skewed. So therefore we look at, on the liability side, what is the composition of the liability? Are these short-term borrowings to sustain a medium-term loan which has a life of, let's say, 5 years or 3 years? You raise money, certificate of deposit, based on that which has a life of up to, let's say, one year, and based on that you are giving credit to what extent you are giving credit for 3 years or 5 years. So we see whether the liability and the asset side, the components and the structure of liability and the structure of the asset side, whether they are well balanced. So we look at the deposits. Now I mentioned that we have not hardcoded any CD ratio, but I think the banks are today far more aware about the requirements on this, and the CD ratio at the system level today is around 80%, which is a considerable amount of improvement over what it was a few months ago. But there are a few, just you can count them, some outliers here and there where also we see that there is improvement. So therefore we look at two broad factors when it comes to credit growth. One is the underwriting standards, and in underwriting standards we also see whether the institution, not so much in the case of banks but in the case of NBFCs, whether it has got the bandwidth to sustain that kind of high credit growth, and whether in the process the underwriting standards or the due diligence that is expected of them is getting diluted. So our first focus is to look at the quality of the underwriting standards. Second aspect we look at is the balance between the structuring, the structure of their liability and the asset side. That is, whether credit growth for that particular banking institution is going to be sustainable or not. That is something which we look at. And what we do is that wherever we see any mismatch or any issue building up, we always engage with the banking entity and flag the issues and expect them to take the correct corrective action. And I'm happy to say that I think almost all banks are responding very positively to our regulatory and supervisory expectations.

You see, there is no hard data to establish that the money is going into the stock market. There are anecdotal evidences that money is going into the stock market. How much of it has gone into the stock market, it's very difficult to estimate. We did a sample survey internally. It was a quick sample survey internally, and based on that, we have a broad sense of what's happening in that particular area. Since it was not a survey result which we share outside, it should be done carefully, a survey has got certain essential features. So that survey was a quick survey, so the outcome of that I am not in a position to share. But we broadly have a sense of what is happening. We have tried our best to quantify how much possibly could have gone into the stock market, but again I cannot vouch for that figure because it was just a small quick sample survey. What is necessary is that the banks themselves need to also look at the end use of the unsecured loans which they are extending. It's very difficult for the banks to ensure that it is indeed gone for that. Loans which are given for, let us say, housing purposes or for some consumer durables, etc., that can be monitored. But unsecured loans, open-ended, very difficult to monitor. But to the extent possible, I think there is a need for banks to also try and monitor that, which many of them are doing it after our discussion with them. So we are very watchful of that segment, and we have, as you know, from the regulatory side, there are standards, norms which RBI has prescribed with regard to, for example, IPOs. Earlier, the NBFCs could give very high amounts, there was no restriction. Now we have restricted it to 1 crore. Banks also, loans against shares, if I remember correctly, it's about 20 lakhs, and for IPOs it's about 10 lakhs or so, if my memory serves me right. So there are norms prescribed. How much of it is going to stock market, very difficult to quantify. But we are trying our best, we have tried our best to monitor and get a sense of what could be the total quantum which could have gone to the stock markets. And I think overall for the banking sector, I do not see it as a major risk at the moment. Individual institutions, the position may vary. We are monitoring it. But at the same time, let me also qualify by whatever I am saying is that there is no hard data to establish how much has gone, but we have done a broad assessment and we feel that at the moment it's not something which can cause systemic instability or anything of that sort.

I remember last year at this BFSI event, I had said that the growth is likely to be, I think against 6.5 which we had given initially, I had said it is likely to touch 7% or something like that, and it was carried by the Business Standard very prominently the next day. And indeed the growth was not only in excess of 7% but it exceeded 8%, which I incidentally mentioned in my interaction at Davos where our projection was still well below 8%. I said I will not be surprised if growth touches 8%. But I'm no astrologer, very difficult to say things in a dynamic world. Things can change very fast. But you see, on the growth front, let me put things in the right perspective. I said it in another interaction recently, and before that, let me mention that as you talked about international agencies, lest I forget, the IMF in its World Economic Outlook which was released on 22nd or 23rd of October, just on the eve of the IMF spring meetings, IMF has projected 7% growth for India, lower than yours. Ours is 7.2. Now IMF has projected 7%, so therefore I think that fact needs to be also placed on the table. And IMF, I think among the international institutions, it is certainly the best place to make assessment of individual countries. Now, so far as our economy is concerned, the data which is coming in is now mixed. The fast-moving indicators which are coming, the high-speed indicators as I call it, the high-speed indicators which we monitor, there are about 70 or 80 of the high-speed indicators which we follow, which we monitor. In that, I find that it is only IIP numbers and FMCG sales in the urban sector, FMCG sales urban and IIP, which have considerably moderated. But other than that, the GST e-way bills, the toll collections, the air passenger traffic, the performance of the steel industry, the performance of the cement industry, steel consumption, cement sales, the automobile sector in October, about which so much was talked about, automobile sector in October has done exceedingly well. The growth is about 30%, of which the two-wheeler sales are something like 38 point something, about 38-39%, four-wheelers it's about 23%. So automobile sector, the data that is coming is very robust, very strong in October. So overall, therefore, if you see the incoming data, it presents a mixed picture, but where the positives outweigh the negatives. And we are just beginning the second half of the current year. The first quarter growth, it's well known to all of you, was affected because of low government expenditure, both center and states, because of the elections to the Parliament. And also the first quarter, what happened is that, which was again clarified by the RBI State of the Economy Bulletin article, is that the subsidy payments by the state were very high. So to arrive at GDP, it is basically your GVA plus indirect taxes minus subsidies. Subsidy outgo was very high in the first quarter, so that also pulled down the GDP number lower. Government expenditure should start picking up. Both revenue and capital expenditure of center and states have started picking up. Subsidy outgo remains an issue. Second quarter, I find subsidy outgo payment towards subsidy of the general government has gone up, so that will have some impact which may have a negative impact on the GDP number. But down the line, I think economic activity remains quite robust. Agriculture sector has done very well. Yesterday, the initial estimates of kharif production came, and it's about 6% higher than last year. Services sector is doing very well. Cumulatively this year, the services exports have grown by about 14%. Manufacturing, IIP which had slightly dipped in September, in October it has again gone up from 56 something to 57.5 or so. Services sector PMI which came out today morning, I talked about manufacturing sector PMI. Services sector PMI, the data which was released at 10:30 as I was sitting here, there also there is an uptick. It had come down last month from about 57 to 56, now it is back at 57 something. So therefore, and the rest of the second half of the year is there. So therefore I would not rush to declare that the economy is slowing down. I would wait. And August rains also have been a factor which has affected economic activity. So data that is coming in, to summarize that long answer again, data which is coming in is mixed, but the positives outweigh the negatives, and by and large underlying economic activity remains fairly strong. Whether I am optimistic or pessimistic is not the issue. I'm just going by the hard evidence that is available.

No, I will disagree with that. You see, we have to remember that CBDC is what we have done in CBDC, it's a pilot project. It is still in experimentation stage. And we never intended that from day one we will go for a nationwide rollout or anything like that, because after all we are dealing with currency. The safety and security and the robustness of the design and its security aspects is very important. It has also got other implications for monetary policy, for the larger economy. So it is a pilot which we are doing, it's at experimentation stage. There are learnings every day with regard to design features, with regard to the possible use cases where all CBDCs can be used, with regard to its potentialities. So we are on a learning curve, and we have said, and I have myself said, that we are in no great hurry to launch CBDC. There's no target date. We are experimenting it. When we are convinced that this is the time to launch it, we will launch it. So therefore, what is in a pilot should be looked as a pilot. We don't want to announce a nationwide launch in a great hurry. So CBDC is very much there. New use cases are coming up every day. For example, giving CBDC credit, some banks have extended credit in CBDC to tenant farmers. Now tenant farmers who do not have a land title or who do not have a formal registration of the tenancy agreement, to tenant farmers also the bank, I think many of the bankers are here today, I would request some of the bank CEOs who are present here who are into CBDC experiment, perhaps they may like to touch upon it and highlight it. So loans to CBDCs, programmed CBD loans to tenant farmers, so that it can be used for a specific purpose, like for example, to buy fertilizers. That CBDC can be only encashed and utilized in a fertilizer depot. It cannot be used elsewhere. Carbon credits also in the agriculture, that is also under experimentation. In September, in fact, in this very center, this GIFT City center, when the GFF was held around 30th August, the Prime Minister was here and he talked about CBDC, etc. And then we got this, after that, when he visited our stall, we explained to him what are the CBDC features and all that. Then he was also very keen to know about what are the applications of CBDC, etc. Then the idea came up, and subsequently, I think in around the middle of September, the Subhadra scheme of the state government of Odisha, where they were giving certain cash support to women, that also was given in CBDCs. So there are many use cases in CBDCs. Corporates are also now giving CBDCs to their employees instead of giving them some vouchers for lunch or lunch vouchers, it is now being given in CBDCs. So there are many use cases which are coming up. There is greater interest in CBDCs now under the aegis of the BIS, Basel, that is Bank for International Settlements, in CBDC for cross-border payments. So CBDC is therefore in experimentation stage, in pilot project. In India, we are slightly ahead of many advanced economies, quite ahead I would say, ahead of many advanced economies in this regard. But internationally, there is greater expectation about CBDC. So CBDC, we have made interoperable with UPI. Programmability, interoperability, the facility of making offline payments are the positive features of CBDC. And I think CBDC will facilitate cross-border payments in a much more efficient and cost-effective manner than anything else. About coexistence with UPI, about why, if you have UPI, why are you having CBDC? I think both can complement each other, both can coexist. And let me leave it at that, because if I go into further details, I don't want to deprive you of other questions. And I think I would expect it'll be really good if the banks, bank CEOs also touch upon it. No compulsion to the bank CEOs, it's their choice.

No, I think that's not at all correct. Let me put things. That's not at all correct. So I'm sorry to disappoint you. Before that, you said 87,000 we paid, then we paid 2 lakh 11,000 crores. Before 87, we had paid only 30,000 crores. So therefore there are ups and downs, and it has got nothing to do with currency swap, etc. You look at the RBI balance sheet and the annual report which was released sometime in May this year, because within 2 months as per the RBI Act it has to be published. So the RBI accounts were finalized and it's there in the annual report. So if you look at the annual report, it's very clear from where this additional income has come and that has resulted in this payment of 2 lakh 11,000 crores to the government. It is primarily because of two or three major factors. One, this time the requirement for provisioning in the contingency fund, the provisioning requirement for the contingency fund this time was much lower because the earlier balances were fairly high. In the previous year, we had transferred more than 1 lakh crore to the contingency fund. This year, the transfer was about 25-30,000 crores. So the requirement of provisioning was less as per the Bimal Jalan Committee recommendations. And our entire income, this time the additional income, the big income we got was entirely from our foreign currency assets. Foreign currency assets would mean the deployment of our reserves in the securities of other countries, whether it is US government securities or it is dollar denominated or it is euro denominated or pound sterling denominated. So it is basically the income from the foreign assets, the interest income from foreign assets. Then the exchange rate fluctuations also, when exchange rates go up, naturally when you convert that, when the rupee depreciates vis-à-vis the dollar, naturally in terms of rupees each dollar is more. So it is primarily because of the interest income on foreign currency assets and because of less provisioning this year. The details are there in the annual accounts, and I think it's there for you to see. It has got nothing to do with this buy-sell or sell-buy swaps. RBI does not have a profit and loss account. There is no concept of profit in our balance sheet. What is in our balance sheet is surplus transfer, and the surplus is originating from factors which are not controlled by us. Our interest income was high because the US Fed and the other advanced economy central banks decided to hike their interest rates. So when their interest rates went up, naturally our interest income went up. So we don't control the factors which contribute to our interest income. So therefore it is an outcome of what is happening all over, and what we do is a pure accounting exercise, very transparent. It's there in the annual accounts.

Now I think our communication has been very consistent. If you carefully recollect what I said in my monetary policy statement, and it's a written statement which is available on the RBI website, what I said is that we changed the stance and we said that it gives us flexibility and optionality to RBI to decide the future course of action. We did that. We changed the stance because we felt, the Monetary Policy Committee felt, that growth and inflation are now well balanced, well poised, and it was appropriate to therefore change the stance. That's why we changed the stance. I also said there are significant risks. In fact, my statement, if you see, I said there are significant risks. I repeat, it is there in the statement. There are significant risks, I repeat, significant upside risks to inflation. So I had reiterated the phrase 'significant risks'. I had said significant risks, I repeat, it was there in the statement. So therefore I had emphasized that there are significant risks, and I had said why we see the significant risks because of continuing geopolitical conflicts, geoeconomic fragmentation, the climate-related, the weather-related risks, and the commodity prices going up. The latest data which was available to the MPC on the eve of its meeting was the FAO data with regard to food price index that had shown an uptick. Metal prices had also gone up. Some commodity prices were also going up. So we had flagged these risks. So therefore, I think the message was very clear that look, we have to be very cautious in our future course of action. It should not be assumed that I have done this, we have done this, so therefore the next step is a rate cut. A change in stance doesn't mean that the next step is a rate cut in the next very next meeting. It's not so. And what I have done subsequently in other interactions with the media and outside is I have only reiterated that. So there is consistency in what we have done, what we have said. Now if there was some amount of misrepresentation, misinterpretation, I have to see why that misinterpretation came. Probably misinterpretation, it's not so much of misinterpretation, but I think this is market expectations. Like inflation expectations, I think it is market expectations which perhaps sometimes works to pressurize the central bank. But we are not under any pressure to go for the next step. The next course, on a serious note, has to be taken very carefully. So far as inflation is concerned, I had said in my monetary policy statement very clearly that September and October the inflation prints are expected to be higher. September came at 5.5%. October, we had said that, and I reiterate it again today, October inflation CPI numbers are again going to be very high, perhaps higher than the September number. So therefore I had warned it in my monetary policy statement, and so our communication is fairly consistent.

I think it's the RBI logo, which is a tiger. So you see, the tiger is known for two things. I'm talking about tiger, the animal. The tiger is known for two things: one, strength; two, agility. Today the Indian economy has got strength, and RBI continues to be agile. So I think the logo of RBI says it all.

Now I think it's for keen observers of RBI over the years, Sesh D is there, Bacchar G is here, and there are so many other faces I see here. It's for keen observers to say that. But if you ask me, I think I would like to say that the inherent strength of Team RBI, their analysis of situations, their proactiveness and agility, so it is a strength of the team RBI. For me, it is perhaps my long experience of having worked in the finance sector. And our effort is always to be proactive, to try and read the situation, to identify the potential risks and act in time and act proactively before the water spills over. So we have tried to be as proactive as possible. Just to give an example, when one of the mutual fund schemes during the peak of the pandemic collapsed, let me not mention the name, it's known to all of you. It happened on a Thursday. We were aware that it was happening, so we were monitoring it. It happened on Thursday. We saw the market response on Friday. Saturday, Sunday, we worked. Monday, when the market opened, we announced a liquidity support of 50,000 crores, and the problem settled down. So our endeavor is to act preemptively, to act in time, to remain agile, and try and identify potential risks before they become too big. Basically, the effort is to constantly smell around, look around, and see what are the possible risk buildups. So I think overall this has worked. And after having said that, let me also say that all the stakeholders in the financial sector have also equally contributed to what the Indian macro financial sector is today.

You see, Dr. Y.V. Reddy was an eminent central banker not only in India but internationally. I have a lot of respect and regard for Dr. Y.V. Reddy and his contribution to India's financial sector and to the RBI. But coming to your point, I think one of the basic things that you learn in civil service is the art of saying no.

You see, every catch is as serious and as important as the previous catch. Sometimes you drop what looks to be an easy catch, you drop it out of carelessness. Sometimes you take very difficult catches. But about my splint, not to worry, I can still take a catch today. And each challenge looks bigger than the previous one. So therefore it is difficult to say which challenge was bigger, which challenge was not so big or lesser. It's very difficult to say because never underestimate a challenge.

I think that's almost like asking a question as they ask in some contest. It's a googly, so let me try and play it. You see, some of the, I think we started, if I remember correctly, quoting Mahatma Gandhi when the COVID pandemic started. And the first few, I would say that it started, the first announcement, I remember the first three or four meetings during the announcements in COVID. I distinctly remember the dates: March 27th, then 17th April, then 22nd May, and then I think it was 5th or 6th August, because these were very important. And I always remember that because I almost remember the dates. I think every Mahatma Gandhi quote was contextual. If you see, even now also, every Mahatma Gandhi quote is contextual. Something we want to convey in a particular meeting, and we find a quote from Mahatma Gandhi which is appropriate for the occasion. So every quote from Mahatma Gandhi is contextual and appropriate for the occasion. Now my favorite quote, I think perhaps the first few quotes when the COVID started around March, April, May, I think there are two or three quotes that would be my favorites. And what was our endeavor at that time? You see, there was a crisis of confidence, there was a lot of anxiety, there was a nationwide lockdown announced. Every activity had come to a standstill. Financial markets were in a lot of anxiety as to what is going to happen. So our job was to give confidence to the markets by words and action. By action, I mean by cutting the interest rates, by announcing moratorium, by giving liquidity support, open-ended liquidity support, by giving targeted support, by taking so many other measures, announcing moratorium followed by announcing a resolution framework for the loan outstandings of banks and NBFCs. So those were measures taken through action. Our communication also had to be appropriate to the occasion. So the spirit behind our communication was to give confidence to the markets, to build confidence, to address their anxiety. So in that background, I think I remember, I don't exactly remember the quotes, I think there was one quote from Mahatma Gandhi which says that when the horizon is the darkest, it is faith that prevails and comes to your rescue, or something like that. Then there is another one: in the midst of death, life persists; in the midst of darkness, light persists, something like that. So the idea was to give confidence to the markets by action and by words. So therefore our communication is always, so favorite quotes were one of the first few quotes from during the period of the COVID. And I think what we are now doing is basically contextual, appropriate for the occasion. That's how we select the quotes.

Thank you, thank you very much. I see somebody raising hand, but I don't think we are taking audience questions. You can engage bilaterally perhaps. But it's so, yeah, yeah, I mean you want to take one question? No, because I don't know, if you take one then there will be others who will say I didn't know, had I known I would have raised my hand. Engage with you bilaterally, it's not fair, you know. And there are other panel discussions, so let's not delay it. You can bilaterally engage. Thank you. And I would like to once again thank you, thanks Business Standard, and I would like to also convey my best wishes to Business Standard on this momentous year in its journey, and my best wishes to all the participants. You are all from the financial sector, from the BFSI sector. I think the macro financial stability of the country depends as much on you as it depends on us and other policy makers. I think between the regulators and the sector stakeholders, there has to be continued cooperation to keep our economy, to keep our financial sector healthy and future ready. Thank you very much.

There are two major international events which were awaited by the markets, the financial markets in particular. One was the US elections, the outcome of the presidential elections in the US. Second, the announcement from China about the fiscal policy support that Chinese authorities are expected to announce, which they have said they will announce. Now, depending on the size and the depth of the Chinese policy announcement, what it means for the Chinese economy, what it means for the rest of the global economy in terms of Chinese demand, in terms of its contribution to global slowdown of global growth or giving additional momentum to global growth, so that is one event which is awaited keenly over the last few days or weeks. The other one is of course the US elections, which I think the results are coming out, but in an election I think it's always better and prudent to wait till the entire counting process is over, because till the end it can go either way. So therefore I don't want to comment who's going to win or what will be the eventual outcome, I will refrain from doing that. But two things are very clear. Overall from all respects, I'm not just talking about with regard to financial sector or the trading sector or the geopolitical in terms of diplomatic relations, I think overall India-US relations have become much stronger. There is a strategic partnership between the two countries and that will continue irrespective of who wins. Now this is not my domain but this is what I'm telling you is common sense. The second thing is, irrespective of the global developments, irrespective of the outcome of the US elections and what kind of spillovers it will have for rest of the world, the Indian economy and the Indian financial sector is today well placed and very resilient to deal with any kind of spillover which is coming from the external world. We are impacted definitely by what's happening in the rest of the world. What is happening there, we are a bystander, we are watching. But when it comes to our domestic market, as a regulator we are not bystanders, we are there very much in the market. And I think our overall financial sector and the overall Indian macroeconomy and macro financial conditions are today very resilient to deal with any kind of spillovers in comparison to many other countries.

You see, there are totally about 9,400 NBFCs. There's a new regulatory architecture for that. We have categorized them on the basis of their scale and complexity. So out of 9,400 all NBFCs, action has been taken against four. So therefore you can see that RBI's action is very calibrated, very selective, and it is taken in a very measured way. Now every such action which is taken is not abrupt, it is not sudden. The action is preceded by months of direct bilateral engagement with the individual entities. We find certain broad deficiencies, certain serious deficiencies, it is pointed out to the institutions. We give them enough time to take the corrective measures. In many cases the corrective measures are taken and we don't take any action at all. In fact, the number of cases where we found deficiencies and where we did not take any action because the corrective actions were taken and whatever were the regulator's expectations were complied with, so the number of cases where we did not take action is actually much larger. Now that doesn't mean that there is something fundamentally wrong with our NBFC sector or the financial sector on the whole. The financial sector, the NBFC sector at the system level remains very robust. It's only in a few cases where we do not see adequate action being taken or we do not see action being taken in time and in sufficient, it is not up to our expectations or it is getting delayed, only in those cases we take action. And the detailed reasons for the action is always shared with the individual company. It's not as if they are kept in the dark. Action is preceded by bilateral discussion with them, bilateral engagement with them. They know what are the concerns of the regulator. When we take the action, we also share with them formally the detailed reasons as to why we have taken the action and we point out that these are the areas where we find deficiencies and we would expect you to act. Our action is not punitive, our action is corrective. You would have seen in a number of cases where we have taken action, after 6 months or 8 months when the compliance is completed, it's 100% or near 100%, and if you are satisfied that the rest of the compliances will be done in the next few weeks or so, we withdraw the restrictions. It is good for the individual institution itself for its sustainability, it is good for the financial sector, and above everything it is good for the consumer. All actions are taken in the consumer interest. And communication, Shaktikanta Das talked about RBI's communication. You would have seen that the press note which we issue these days when action is taken are fairly explicit. They point out why the action has been taken. So our effort has been to be far more consultative, direct engagement, transparent communication, and measured action. It's not abrupt, it's not arbitrary. You may say I'm being defensive, I'm not, because I think it is necessary in a gathering in such an informed and well-informed gathering like this where there are so many, I think the entire all the participants are from the BFSI sector, I think it was very important for me to explain the things in their totality. Sorry for that very long answer but I think it was necessary to put things in the right perspective.

You see, our action and approach is very nuanced. It's not so much that the credit growth is high or low. We don't have a view on that, whether the credit growth should be this much or the credit growth is high or low. It depends on the situation, the conditions prevailing in each bank. There are opportunities to lend, naturally the banks will lend. After COVID there was a spurt in consumer demand for retail loans, etc. Naturally the banks and the other lenders will lend where there is an opportunity. There are a couple of things which we always try to monitor. Number one, what is the underwriting standard which the bank or the other lender, NBFC, what are the underwriting standards? In the banking sector by and large, I feel that the underwriting standards today in India, there has been considerable amount of improvement. In the NBFC sector also there has been improvement, but there still we find a few outliers where we feel that the underwriting standards need to be made more robust. So again, at the system level, I, you know, at the system level there is no issue, let me be very clear. So we always look at what kind of underwriting standards are being followed, whether the underwriting standards are being diluted only to push credit. So that is number one. Second thing is we also look at the liability side with regard to each and every, you are talking about banks so I will talk about banks, about each and every banking entity. We look at the liability side also, where their deposits are growing proportionately with their credit growth, because there has to be some correlation between them. And we have not hardcoded that this shall be the CD ratio for the banks. RBI has not prescribed any, it's not there, there is no hard coding. But this is something which I think every bank, every banker understands that the CD ratio cannot be completely skewed. So therefore we look at on the liability side, what is the composition of the liability? Are these short-term borrowings to sustain a medium-term loan which has a life of let's say 5 years or 3 years? You raise money, certificate of deposit, based on that which has a life of up to let's say one year, and based on that you are giving credit to what extent, you are giving credit for 3 years or 5 years? So we see whether the liability and the balance side, the components and the structure of liability and the structure of the asset side, whether they're well balanced. So we look at the deposits. Now I mentioned that we have not hardcoded any CD ratio, but I think the banks are today far more aware about the requirements on this. And the CD ratio at the system level today is around 80%, which is I think a considerable amount of improvement over what it was a few months ago. But there are a few, just you can count them, some outliers here and there where also we see that there is improvement. So therefore we look at two broad factors when it comes to credit growth. One is the underwriting standards, and in underwriting standards we also see whether the institution, not so much in the case of banks but in the case of NBFCs, whether it has got the bandwidth to sustain that kind of high credit growth and whether in the process the underwriting standards or the due diligence that is expected of them is getting diluted. So our first focus is to look at the quality of the underwriting standards. Second aspect we look at is the balance between the structuring, the structure of their liability and the asset side. That is whether credit growth for that particular banking institution is going to be sustainable or not. That is something which we look at. And what we do is that whenever we see any mismatch or any issue building up, we always engage with the banking entity and flag the issues and expect them to take the correct corrective action. And I'm happy to say that I think almost all banks are responding very positively to our regulatory and supervisory expectations.

You see, there is no hard data to establish that the money is going into stock market. There are anecdotal evidences that money is going into stock market. How much of it has gone into the stock market, it's very difficult to estimate. We did a sample survey internally, it was a quick sample survey internally, and based on that we have a broad sense of what's happening in that particular area. Since it was not a survey result which we share outside, a survey has got certain essential features, so therefore that survey was a survey, so the outcome of that I am not in a position to share. But we broadly have a sense of what is happening. We have tried our best to quantify how much possibly could have gone into the stock market, but again I cannot vouch for that figure because it was just a small quick sample survey. What is necessary is that the banks themselves need to also look at the end use of the unsecured loans which they are extending. It's very difficult for the banks to ensure that it is indeed gone for that. Loans which are given for let us say housing purposes or for some consumer durables etc. can be monitored, but loans, unsecured loans, open-ended, very difficult to monitor. But to the extent possible, I think there is a need for banks to also try and monitor that, which many of them are doing it after our discussion with them. So we are very watchful of that segment and we have, as you know from the regulatory side, there are standards, norms which RBI has prescribed with regard to for example IPOs. Earlier the NBFCs could give very high amounts, there was no restriction, now we have restricted it to 1 crore. Banks also loans against shares, if I remember correctly it's about 20 lakhs, and for IPOs it's about 10 lakhs or so if my memory serves right. So there are norms prescribed. How much of it is going to stock market, very difficult to quantify, but we are trying our best, we have tried our best to monitor and get a sense of what could be the total quantum which could have gone to the stock markets. And I think overall for the banking sector, I do not see it as a major risk at the moment. Individual institutions, the position may vary, we are monitoring it. But at the same time, let me also qualify by whatever I am saying is that there is no hard data to establish it how much has gone, but we have a broad assessment and we feel that at the moment it's not something which can cause systemic instability or anything of that sort.

No, I remember seem to be very, very bullish. I remember last year at the BFSI this event I had said that the growth is likely to be, I think again 7, 6.5 which we had given initially, I had said is likely to touch 7% or something like that, and it was carried by the Business Standard very prominently the next day. And indeed the growth was not only in excess of 7% but it exceeded 8%, which I incidentally mentioned in my interaction at Davos where our projection was still well below 8%. I said I will not be surprised if growth touches 8%. But I'm no astrologer, very difficult to say things in a dynamic world, things can change very fast. But you see, on the growth front, let me put things on the right perspective. I said it in another interaction recently, and before that let me mention that as you talked about international agencies, lest I forget, the IMF in its World Economic Outlook which was released on 22nd or 23rd of October, just on the eve of the IMF spring meetings, IMF has projected 7% growth for India. Lower than yours? 7.1? Yours? No, ours is 7.2. Yeah, 7.2. Now IMF has projected seven, so therefore I think that needs to be also placed on the table. And IMF I think among the international institutions it is certainly the best place to make assessment of individual countries. Now so far our economy is concerned, the data which is coming in is now mixed. The fast moving indicators which are coming, the high-speed indicators as I call it, the high-speed indicators which we monitor, there are about 70 or 80 of the high-speed, the fast moving, these high-speed indicators which we follow, which we monitor. In that I find that it is only IIP numbers and FMCG sales in the urban sector, FMCG sales urban and IIP which have considerably moderated. But other than that, the GST e-way bills, the toll collections, the air passenger traffic, the performance of the steel industry, the performance of the cement, steel consumption, cement sales, the automobile sector in October about which so much was talked about, automobile sector in October has done exceedingly well. The growth is about 30%, of which the two-wheeler sales are something like 38 point something, about 38, 39%, four-wheelers it's about 23%. So automobile sector the data that is coming is very robust, very strong in October. So overall therefore if you see the incoming data presents a mixed picture, but where the positives outweigh the negatives. And we are just beginning the second half of the current year. The first quarter growth, it's well known to all of you, was affected because of low government expenditure both center and states because of the elections, you know the elections to the parliament. And also the first quarter what happened is that, which was again clarified by the RBI State of the Economy bulletin article, is that the subsidy payments by the state were very high. So to arrive at GDP it is basically your GVA plus indirect taxes minus subsidies. Subsidy outgo was very high in the first quarter, so therefore that also pulled down the GDP number. Lower government expenditure, government expenditure has started picking up, both revenue and capital expenditure of center and states have started picking up. Subsidy outgo remains an issue. Second quarter I find subsidy outgo payment toward subsidy of the general government has gone up, so that will have some impact which may have a negative impact on the GDP number. But down the line, I think economic activity remains quite robust. Agriculture sector has done very well. Yesterday I think the initial estimates of kharif production came and it's about 6% higher than last year. Services sector is doing very well. Cumulatively this year the services exports have grown by about 14%. Manufacturing, IIP which had slightly dipped in September, in October it has again gone up from 56 something to 57.5 or so. Services sector PMI which came out today morning, I talked about manufacturing sector PMI, services sector PMI which was the data which was released at 10:30 as I was sitting here, there also there is an uptick. It had come down last month from about 57 to 56, now it is back at 57 something. So therefore, and rest second half of the year is there. So therefore I would not rush to declare that the economy is slowing down. I would wait. And August rains also has been a factor which has affected economic activity. So data that is coming in, to summarize that long answer again, data which is coming in is mixed, but the positives outweigh the negatives, and by and large underlying economic activity remains fairly strong. Whether I'm optimistic or pessimistic is not the issue, I'm just going by the hard evidence that is available.

No, I will disagree with that. Okay, you see, we have to remember that CBDC is what we have done in CBDC, it's a pilot, it's a pilot project, it is still in experimentation stage. And we never intended that from day one we will go for a nationwide rollout or anything like that. Because after all we are dealing with currency. The safety and security and the robustness of the design and its security aspects is very important. It has got also other implications for monetary policy, for the larger economy. So it is a pilot which we are doing, it's at experimentation stage. There are learnings every day with regard to design features, with regard to the possible use cases where all CBDCs can be used, with regard to its potential specialities. So we are on a learning curve, and we have said, and I have myself said, that we are in no great hurry to launch a CBDC. There's no target date. We are experimenting it. When we are convinced that well this is the time to launch it, we will launch it. So therefore what is in a pilot should be looked as a pilot. We don't want to announce a nationwide launch in a great hurry. So CBDC is very much there. New use cases are coming up every day. For example, giving CBDC credit, some banks have extended credit in CBDC to tenant farmers. Now tenant farmers who do not have a land title or who do not have a formal registration of the tenancy agreement, to tenant farmers also the bank, I think many of the bankers are here today, I would request some of the bank CEOs who are present here who are into CBDC experiment etc., perhaps they may like to touch upon it and highlight it. So loans to CBDCs, programmed CBDC loans, that is programmed CBDC loans to tenant farmers so that it can be used for a specific purpose like for example let's say to buy fertilizers. That CBDC can be only encashed and utilized in a fertilizer depot, it cannot be used elsewhere. Carbon credits also in the agriculture, that is also under experimentation. September, in fact in this very center, this Jio Center, when the GFF was held around 30th August, the Prime Minister was here and he talked about CBDC etc. And then we got this, then after that, when he visited our stall we explained to him what are the CBDC features and all that. Then he was also very keen to know about what are the applications of CBDC etc. Then the idea came up and subsequently I think in around the middle of September, the Subhadra scheme of the state government of Odisha where they were giving certain cash support to women, that also was given in CBDCs. So there are many use cases in CBDCs. Corporates are also now giving CBDCs to their employees instead of giving them some vouchers for lunch or lunches and all, it is now being given in CBDCs. So there are many use cases which are coming up. There is greater interest in CBDC. Now under the aegis of the BIS, Basel, that is Bank for International Settlements, in CBDC for cross-border payments. So CBDC is therefore in experimentation stage, in pilot in India. We are slightly ahead of many advanced economies, quite ahead I would say, ahead of many advanced economies in this regard. But internationally there is greater expectation about CBDC. So CBDC we have made interoperable with UPI. Programmability, interoperability, the facility of making offline payments are the positive features of CBDC. And I think CBDC will facilitate cross-border payments in a much more efficient and cost effective manner than anything else. About coexistence with UPI, about why if you have UPI why are you having CBDC, I think both can complement each other, both can coexist. And let me leave it at that because if I go into further details I don't want to deprive you of other questions. And I think it will be really good if the banks, bank CEOs also touch upon it. No compulsion to the bank CEOs, it's their choice.

No, I think that's not at all correct. Let me put things, that's not at all correct. Okay sir, so I'm sorry to disappoint you. Yeah, before that you said 87,000 we paid, then we paid 2 lakh 111,000 crores. Before 87 we had paid only 30,000 crores. So therefore there are ups and downs and it has got nothing to do with currency swap etc. You look at the RBI balance sheet and the annual report which was released sometime in May this year, because within two months as per the RBI Act it has to be published. So the RBI accounts were finalized and it's there in the annual report and sometime in May we have released it. So if you look at the annual report it's very clear from where this additional income has come and that has resulted in this payment of 2 lakh 11,000 crores to the government. It is primarily because two or three major factors. One, this time the requirement for provisioning in the contingency fund, the provisionary requirement for the contingency fund this time was much lower because the earlier balances were fairly high. In the previous year we had transferred more than 1 lakh crore to the contingency fund. This year the transfer was about 25,300 crores. So the requirement of provisioning was less as per the Bimal Jalan committee recommendations. And our entire income this time, the additional income, the big income we got was entirely from our foreign currency assets. Foreign currency assets would mean the deployment of our reserves in the securities of other countries, whether it is US government securities or it is dollar denominated or it is euro denominated or pound sterling denominated. So it is basically the income from the foreign assets, the interest income from foreign assets. Then the exchange rate fluctuations also, when exchange rates go up, naturally when the rupee depreciates vis-a-vis the dollar, naturally in terms of rupees each dollar is more. So it is primarily because of the interest income on foreign currency assets and it is because of less provisioning this year. The details are there in the annual accounts and I think it's there for you to see. It has got nothing to do with this buy-sell or sell-buy swaps. RBI does not have a profit and loss account. There is no concept of profit in our balance sheet. What is in our balance sheet is surplus transfer, and the surplus is originating from factors which are not controlled by us. Our interest income was high because the US Fed and the other advanced economy central banks decided to hike their interest rates. So when their interest rates went up, naturally our income, interest income went up. So we don't control the factors which contribute to our interest income. So therefore it is an outcome of what is happening all over and what we do is a pure accounting exercise, very transparent, it's there in the annual accounts.

No, I think our communication has been very consistent. If you carefully recollect what I said in my monetary policy statement, and it's a written statement which is available on the RBI website, what I said is that we changed the stance and we said that it gives us flexibility and optionality to RBI to decide the future course of action. We did that. We changed the stance because we felt, the monetary policy committee felt, that growth and inflation are now well balanced, well poised, and it was appropriate to therefore change the stance. That's why we changed the stance. I also said there are significant risks. In fact my statement, if you see, I said there are significant risks, I repeat it, it is there in the statement, there are significant risks, I repeat significant risks on the downside or sorry, significant upside risks to inflation. So I had reiterated the phrase significant risks. I had said significant risks, I repeat it, it was there in the statement. So therefore I had emphasized that there are significant risks and I had said why we see the significant risks because of continuing geopolitical conflicts, geoeconomic fragmentation, the climate related, the weather related risks, and the commodity prices going up. The latest data which was available to the MPC on the eve of its meeting was the FAO data with regard to food price index that had shown an uptick, metal prices had also gone up, some commodity prices were also going up. So we had flagged these risks. So therefore I think the message was very clear that look, we have to be very cautious in our future course of action. It should not be assumed that I have done this, we have done this, so therefore the next step is a rate cut. A change in stance doesn't mean that the next step is a rate cut in the next very next meeting. It's not so. And what I have done subsequently in other interactions with the media and outside is I have only reiterated that. So there is consistency in what we have done, what we have said. Now if there was some amount of misinterpretation, I have to see why that misinterpretation came. Probably misinterpretation, it's not so much of misinterpretation but I think this is market expectations. Like inflation expectations, I think it is market expectations which perhaps works to pressurize the central bank. But we are not under any pressure to go for the next step. The next course on a serious note has to be taken very carefully. So far as inflation is concerned, I had said in my monetary policy statement very clearly that September and October the inflation prints are expected to be higher. September came at 5.5%. October we had said that, and I reiterate it again today, October inflation CPI numbers are again going to be very high, perhaps higher than the September number. So therefore I had warned it in my monetary policy statement and so therefore our communication I think is fairly consistent.

I think it's the RBI logo which is a tiger. So you see, the tiger is known for two things, I'm talking about tiger the animal. The tiger is known for two things: one, strength, two, agility. Today the Indian economy has got strength and RBI continues to be agile. So I think the logo of RBI says it all.

Now I think it's for keen observers of RBI over the years, Sesh is there, Bachara is here and there are so many other faces I see here, it's for keen observers to say that. But if you ask me, I think I would like to say that the inherent strength of Team RBI, their analysis of situations, their proactiveness and agility, so it is a strength of the team RBI. For me, it is perhaps my long experience of having worked in the finance sector. And our effort is always to be proactive, to try and read the situation, to identify the potential risks and act in time and act proactively before the water spills over. So we have tried to be as proactive as possible. Just to give an example, when one of the mutual fund schemes during the peak of the pandemic collapsed, let me not mention the name, it's known to all of you. It happened on a Thursday. We were aware that it was happening so we were monitoring it. It happened on Thursday. We saw the market response on Friday. Saturday, Sunday we worked. Monday when the market opened, we announced a liquidity support of 50,000 crores and the problem settled down. So our endeavor is to act preemptively, to act in time, to remain agile and try and identify potential risks before they become too big. Basically the effort is to constantly smell around, look around and to see what are the possible risk buildups. So I think overall this has worked. And after having said that, let me also say that all the stakeholders in financial sector have also equally contributed to what the Indian macro financial sector is today.

You see, Dr. Y.V. Reddy is a was an eminent central banker not only in India but internationally. I have lot of respect and regard for Dr. Y.V. Reddy and his contribution to India's financial sector and to the RBI. But coming to your point, I think one of the basic things that you learn in civil service is the art of saying no.

You see, every catch is as serious and as important as the previous catch. Sometimes you drop what looks to be an easy catch, you drop it out of carelessness. Sometimes you take very difficult catches. But about my splint, not to worry, I can still take a catch today. And each challenge looks bigger than the previous one. So therefore I think it is difficult to say which challenge was bigger, which challenge was not so big or lesser. It's very difficult to say because never underestimate a challenge.

I think that's almost like asking a question as they ask in some contest, it's a googly. So let me try and play it. You see, some of the, I think we started, if I remember correctly, quoting Mahatma Gandhi when the COVID pandemic started. And the first few, I would say that it started, the first announcement, I remember the first three or four meetings during the announcements in COVID. I distinctly remember the dates: end of March 27th March, then I think 17th April, then 22nd May, and then I think it was 5th or 6th August. Because these were very important and I always remember that because I almost remember the dates. I think every Mahatma Gandhi quote was contextual. If you see, or even now also, every Mahatma Gandhi quote is contextual. Something we want to convey in a particular meeting and we find a quote from Mahatma Gandhi which is appropriate for the occasion. So every quote from Mahatma Gandhi is contextual and appropriate for the occasion. Now my favorite quote, I think perhaps the first few quotes when the COVID started around March, April, May, I think there are two or three quotes which would be my favorites. And what was our endeavor at that time? You see, there was a crisis of confidence, there was a lot of anxiety, there was a nationwide lockdown announced in COVID, every activity had come to a standstill, financial markets were in a lot of anxiety as to what is going to happen. So our job was to give confidence to the markets by words and action. By action I mean by cutting the rates, interest rates, by announcing moratorium, by giving liquidity support, open-ended liquidity support, by giving targeted support, by taking so many other measures, announcing moratorium followed by announcing a resolution framework for the loan outstandings of banks and NBFCs. So those were measures taken through action. Our communication also had to be appropriate to the occasion. So the spirit behind our communication was to give confidence to the markets, to build confidence to the market, to address their anxiety. So in that background, I think I remember, I don't exactly remember the quotes, I think there was one quote from Mahatma Gandhi which says that when the horizon is the darkest, it is faith that prevails and comes to your rescue or something like that. Then there is another one: in the midst of death, life persists; in the midst of darkness, light persists. Something like that. So the idea was to give confidence to the markets by action and by words. So therefore our communication is always, so favorite quotes were one of the first few quotes from during the period of the COVID. And I think what we are now doing is basically contextual, appropriate for the occasion. That's how we select the quotes.

Thank you, thank you very much. I see somebody raising hand but I don't think we are taking audience questions. You can engage bilaterally perhaps. But it's your, yeah yeah, I mean you want to take one question? No, no, because I don't know if you take one then there will be others who will say I didn't know, had I known I would have raised my hand. So therefore I'll engage with you bilaterally. It's not fair, you know, and there are other panel discussions so let's not delay it. You can bilaterally engage. Thank you. And I would like to once again thank you, thanks Business Standard, and I would like to also convey my best wishes to Business Standard on this momentous year in its journey. And my best wishes to all the participants. You are all from the financial sector, from the BFSI sector. I think the macro financial stability of the country depends as much on you as it depends on us and other policy makers. I think between the regulators and the sector stakeholders, there has to be continued cooperation to keep our economy, to keep our financial sector healthy and future ready. Thank you very much.

Thank you very much to Business Standard for inviting me to this very prestigious event. I think it has become a landmark event in the various financial sector discussions and policy forums that have been established. And I would like to also take this opportunity to compliment Business Standard for attaining their 50th year. I think this is the 50th year. I just got a glimpse of the earlier editions of Business Standard started in 1975, and my congratulations to entire team Business Standard for their journey over the last 50 years. Now coming to your question, Tamal is a very clever bowler. When you say, why do you know, some batsmen, I'm not saying I'm a great batsman, certainly not, but some great batsmen get out to a bowler who appears to be ordinary but not actually ordinary, because you tend to become casual, you tend to go out and hit and in the process you get caught. So never underestimate the bowler is the principle. Never underestimate the person who's interviewing you because you will stumble at a point when you become overconfident. But anyway, on a serious note, thank you Tamal for this interaction. I think I have been having this interaction with you over the last four or five years, this is the fifth year now. There are two major international events which were awaited by the markets, the financial markets in particular. One was the US elections, the outcome of the presidential elections in the US. Second, the announcement from China about the fiscal policy support that Chinese authorities are expected to announce, which they have said they will announce. Now, depending on the size and the depth of the Chinese policy announcement, what it means for the Chinese economy, what it means for the rest of the global economy in terms of Chinese demand, in terms of its contribution to global slowdown of global growth or giving additional momentum to global growth, so that is one event which is awaited keenly over the last few days or weeks. The other one is of course the US elections, which I think the results are coming out, but in an election I think it's always better and prudent to wait till the entire counting process is over, because till the end it can go either way. So therefore I don't want to comment who's going to win or what will be the eventual outcome, I will refrain from doing that. But two things are very clear. Overall from all respects, I'm not just talking about with regard to financial sector or the trading sector or the geopolitical in terms of diplomatic relations, I think overall India-US relations have become much stronger. There is a strategic partnership between the two countries and that will continue irrespective of who wins. Now this is not my domain but this is what I'm telling you is common sense. The second thing is, irrespective of the global developments, irrespective of the outcome of the US elections and what kind of spillovers it will have for rest of the world, the Indian economy and the Indian financial sector is today well placed and very resilient to deal with any kind of spillover which is coming from the external world. We are impacted definitely by what's happening in the rest of the world. What is happening there, we are a bystander, we are watching. But when it comes to our domestic market, as a regulator we are not bystanders, we are there very much in the market. And I think our overall financial sector and the overall Indian macroeconomy and macro financial conditions are today very resilient to deal with any kind of spillovers in comparison to many other countries.

You see, there are totally about 9,400 NBFCs. There's a new regulatory architecture for that. We have categorized them on the basis of their scale and complexity. So out of 9,400 all NBFCs, action has been taken against four. So therefore you can see that RBI's action is very calibrated, very selective, and it is taken in a very measured way. Now every such action which is taken is not abrupt, it is not sudden. Action is preceded by months of direct bilateral engagement with the individual entities. We find certain broad deficiencies, certain serious deficiencies, it is pointed out to the institutions. We give them enough time to take the corrective measures. In many cases the corrective measures are taken and we don't take any action at all. In fact, the number of cases where we found deficiencies and where we did not take any action because the corrective actions were taken and whatever were the regulator's expectations were complied with, so the number of cases where we did not take action is actually much larger. Now that doesn't mean that there is something fundamentally wrong with our NBFC sector or the financial sector on the whole. The financial sector, the NBFC sector at the system level remains very robust. It's only in a few cases where we do not see adequate action being taken or we do not see action being taken in time and in sufficient, it is not up to our expectations or it is getting delayed, only in those cases we take action. And the detailed reasons for the action is always shared with the individual company. It's not as if they are kept in the dark. Action is preceded by bilateral discussion with them, bilateral engagement with them. They know what are the concerns of the regulator. When we take the action, we also share with them formally the detailed reasons as to why we have taken the action and we point out that these are the areas where we find deficiencies and we would expect you to act. Our action is not punitive, our action is corrective. You would have seen in a number of cases where we have taken action, after 6 months or 8 months when the compliance is completed, it's 100% or near 100%, and if you are satisfied that the rest of the compliances will be done in the next few weeks or so, we withdraw the restrictions. It is good for the individual institution itself for its sustainability, it is good for the financial sector, and above everything it is good for the consumer. All actions are taken in the consumer's interest. And communication, Shaktikanta Das talked about RBI's communication. You would have seen that the press note which we issue these days when action is taken are fairly explicit. They point out why the action has been taken. So our effort has been to be far more consultative, direct engagement, transparent communication, and measured action. It's not abrupt, it's not arbitrary. You may say I'm being defensive, I'm not, because I think it is necessary in a gathering in such an informed and well-informed gathering like this where there are so many, I think the entire all the participants are from the BFSI sector, I think it was very important for me to explain the things in their totality. Sorry for that very long answer but I think it was necessary to put things in the right perspective.

You see, our action and approach is very nuanced. It's not so much that the credit growth is high or low. We don't have a view on that, whether the credit growth should be this much or the credit growth is high or low. It depends on the situation, the conditions prevailing in each bank. There are opportunities to lend, naturally the banks will lend. After COVID there was a spurt in consumer demand for retail loans, etc. Naturally the banks and the other lenders will lend where there is an opportunity. There are a couple of things which we always try to monitor. Number one, what is the underwriting standard which the bank or the other lender, NBFC, what are the underwriting standards? In the banking sector by and large, I feel that the underwriting standards today in India, there has been considerable amount of improvement. In the NBFC sector also there has been improvement, but there still we find a few outliers where we feel that the underwriting standards need to be made more robust. So again, at the system level, I, you know, at the system level there is no issue, let me be very clear. So we always look at what kind of underwriting standards are being followed, whether the underwriting standards are being diluted only to push credit. So that is number one. Second thing is we also look at the liability side with regard to each and every, you are talking about banks so I will talk about banks, about each and every banking entity. We look at the liability side also, where their deposits are growing proportionately with their credit growth, because there has to be some correlation between them. And we have not hardcoded that this shall be the CD ratio for the banks. RBI has not prescribed any, it's not there, there is no hard coding. But this is something which I think every bank, every banker understands that the CD ratio cannot be completely skewed. So therefore we look at on the liability side, what is the composition of the liability? Are these short-term borrowings to sustain a medium-term loan which has a life of let's say 5 years or 3 years? You raise money, certificate of deposit, based on that which has a life of up to let's say one year, and based on that you are giving credit to what extent, you are giving credit for 3 years or 5 years? So we see whether the liability and the balance side, the components and the structure of liability and the structure of the asset side, whether they're well balanced. So we look at the deposits. Now I mentioned that we have not hardcoded any CD ratio, but I think the banks are today far more aware about the requirements on this. And the CD ratio at the system level today is around 80%, which is I think a considerable amount of improvement over what it was a few months ago. But there are a few, just you can count them, some outliers here and there where also we see that there is improvement. So therefore we look at two broad factors when it comes to credit growth. One is the underwriting standards, and in underwriting standards we also see whether the institution, not so much in the case of banks but in the case of NBFCs, whether it has got the bandwidth to sustain that kind of high credit growth and whether in the process the underwriting standards or the due diligence that is expected of them is getting diluted. So our first focus is to look at the quality of the underwriting standards. Second aspect we look at is the balance between the structuring, the structure of their liability and the asset side. That is whether credit growth for that particular banking institution is going to be sustainable or not. That is something which we look at. And what we do is that whenever we see any mismatch or any issue building up, we always engage with the banking entity and flag the issues and expect them to take the correct corrective action. And I'm happy to say that I think almost all banks are responding very positively to our regulatory and supervisory expectations.

Our action and approach is very nuanced. It's not so much that the credit growth is high or low. We don't have a view on whether the credit growth should be this much or that; it depends on the situation and conditions prevailing in each bank. There are opportunities to lend, and naturally the banks will lend. After COVID, there was a spurt in consumer demand for retail loans, so naturally banks and other lenders will lend where there is an opportunity. There are a couple of things we always try to monitor. Number one: what are the underwriting standards the bank or other lender, the NBFC, follows? In the banking sector by and large, I feel there has been considerable improvement in underwriting standards in India. In the NBFC sector also there has been improvement, but we still find a few outliers where we feel the underwriting standards need to be more robust. At the system level, there is no issue, let me be very clear. So we always look at what kind of underwriting standards are being followed and whether they are being diluted only to push credit. That is number one. Second, we also look at the liability side for each banking entity. We look at whether deposits are growing proportionately with credit growth, because there has to be some correlation between them. We have not hardcoded that this shall be the credit-deposit ratio for banks; there is no hard coding. But it's something every banker understands: the CD ratio cannot be completely skewed. So on the liability side, we look at the composition: are these short-term borrowings sustaining a medium-term loan with a life of, say, 3 to 5 years? For example, you raise money through certificates of deposit with a life of up to one year, and based on that you give credit for 3 to 5 years. So we see whether the structure of liability and asset sides are well balanced. We look at the deposits. I mentioned we have not hardcoded any CD ratio, but banks today are far more aware of the requirements, and the CD ratio at the system level is around 80%, which is a considerable improvement over what it was a few months ago. There are a few outliers here and there, but we also see improvement. So we look at two broad factors when it comes to credit growth: one is the underwriting standards, and we also see whether the institution has the bandwidth to sustain that kind of high credit growth and whether the underwriting standards or due diligence are getting diluted. Our first focus is the quality of underwriting standards. The second aspect is the balance between the structure of their liability and asset sides, and whether credit growth for that banking institution is sustainable. Wherever we see any mismatch or issue building up, we always engage with the banking entity, flag the issues, and expect them to take corrective action. I'm happy to say that almost all banks are responding very positively to our regulatory and supervisory expectations.

There is no hard data to establish that the money is going into the stock market. There are anecdotal evidences that money is going into the stock market. How much has gone into the stock market? It's very difficult to estimate. We did a sample survey internally—it was a quick sample survey—and based on that we have a broad sense of what's happening in that area. Since it was not a survey result we would share outside, because a survey has certain essential features, that was a quick survey, so I am not in a position to share the outcome. But we broadly have a sense of what is happening. We have tried our best to quantify how much could have gone into the stock market, but again I cannot vouch for that figure because it was just a small quick sample survey. What is necessary is that the banks themselves need to look at the end use of the unsecured loans they are extending. It's very difficult for banks to ensure it has indeed gone for the intended purpose. Loans given for housing or consumer durables can be monitored, but unsecured loans are open-ended and very difficult to monitor. To the extent possible, there is a need for banks to try and monitor that, which many of them are doing after our discussions with them. We are very watchful of that segment. As you know, from the regulatory side, RBI has prescribed norms: for example, earlier NBFCs could give very high amounts for IPOs; now we have restricted it to 1 crore. Banks' loans against shares, if I remember correctly, are about 20 lakhs, and for IPOs about 10 lakhs. So there are norms prescribed. How much is going to the stock market? Very difficult to quantify, but we are trying our best to monitor and get a sense of the total quantum that could have gone to the stock markets. Overall for the banking sector, I do not see it as a major risk at the moment. Individual institutions' positions may vary; we are monitoring it. But let me also qualify: whatever I am saying, there is no hard data to establish how much has gone. We have done a broad assessment and we feel that at the moment it's not something that can cause systemic instability.

No, I will disagree with that. We have to remember that CBDC is a pilot project. It is still in the experimentation stage, and we never intended from day one to go for a nationwide rollout, because after all we are dealing with currency. The safety, security, and robustness of the design and its security aspects are very important. It also has other implications for monetary policy and the larger economy. So it's a pilot at experimentation stage. There are learnings every day regarding design features, possible use cases, and potentialities. We are on a learning curve, and I have myself said we are in no great hurry to launch CBDC; there is no target date. We are experimenting, and when we are convinced it's time to launch, we will launch. So what is in a pilot should be looked at as a pilot. We don't want to announce a nationwide launch in a great hurry. CBDC is very much there; new use cases are coming up every day. For example, some banks have extended credit in CBDC to tenant farmers. Tenant farmers who do not have a land title or formal registration of tenancy agreement can get programmed CBDC loans for a specific purpose, like buying fertilizers. That CBDC can be only encashed and utilized in a fertilizer depot; it cannot be used elsewhere. Carbon credits in agriculture are also under experimentation. In this very center, the GFF was held around 30th August, the Prime Minister was here, and he talked about CBDC. After that, when he visited our stall, we explained the CBDC features. He was very keen to know about the applications. Subsequently, around mid-September, the Subhadra scheme of the state government of Odisha, which gives cash support to women, was also given in CBDCs. There are many use cases. Corporates are now giving CBDCs to their employees instead of lunch vouchers. There is greater interest in CBDCs now under the auspices of the BIS (Bank for International Settlements) for cross-border payments. So CBDC is in the experimentation stage. In India, we are slightly ahead of many advanced economies in this regard. Internationally there is greater expectation about CBDC. We have made CBDC interoperable with UPI. Programmability, interoperability, and the facility of offline payments are the positive features of CBDC, and I think CBDC will facilitate cross-border payments in a much more efficient and cost-effective manner than anything else. About coexistence with UPI, both can complement each other and coexist. Let me leave it at that, because I don't want to deprive you of other questions. I expect it would be good if the bank CEOs also touch upon it—no compulsion, it's their choice.

No, that's not at all correct. Let me put things straight. Before that you said 87,000; we paid 2 lakh 11,000 crore. Before 87, we had paid only 30,000 crore. So there are ups and downs, and it has got nothing to do with currency swaps. Look at the RBI balance sheet and the annual report released in May this year; it's very clear where the additional income has come from. It is primarily because of two or three major factors. One, the requirement for provisioning in the contingency fund this time was much lower because the earlier balances were fairly high. In the previous year we had transferred more than 1 lakh crore to the contingency fund; this year the transfer was about 25-30,000 crore. So the requirement of provisioning was less as per the Bimal Jalan committee recommendations. The additional income we got was entirely from our foreign currency assets—that is, the deployment of our reserves in government securities of other countries, whether US government securities or Euro or pound sterling denominated. It is basically the interest income from foreign assets. Then exchange rate fluctuations also play a role; when the rupee depreciates vis-à-vis the dollar, naturally each dollar is worth more rupees. So it is primarily because of the interest income on foreign currency assets and less provisioning this year. The details are there in the annual accounts. It has got nothing to do with buy-sell or sell-buy swaps. RBI does not have a profit and loss account; there is no concept of profit in our balance sheet. What is in our balance sheet is surplus transfer, and the surplus originates from factors not controlled by us. Our interest income was high because the US Fed and other advanced economy central banks decided to hike their interest rates. When their interest rates went up, naturally our interest income went up. We don't control the factors that contribute to our interest income. So it is an outcome of what is happening all over, and what we do is a pure accounting exercise, very transparent, as shown in the annual accounts.

I think our communication has been very consistent. If you carefully recollect what I said in my monetary policy statement—it's a written statement available on the RBI website—what I said is that we changed the stance and said it gives us flexibility and optionality to decide the future course of action. We did that because the Monetary Policy Committee felt that growth and inflation are now well balanced and it was appropriate to change the stance. I also said there are significant risks—I repeat, significant upside risks to inflation. I had reiterated the phrase significant risks in the statement. I emphasized the significant risks due to continuing geopolitical conflicts, geoeconomic fragmentation, weather-related risks, and commodity prices going up. The latest data available to the MPC on the eve of its meeting, from the FAO Food Price Index, showed an uptick. Metal prices had also gone up. So we flagged these risks. The message was very clear: we have to be very cautious in our future course of action. It should not be assumed that because we changed the stance, the next step is a rate cut in the very next meeting. It's not so. And what I have done subsequently in other interactions is only reiterated that. So there is consistency in what we have done and said. Now if there was some misinterpretation, I have to see why it came. Probably it's market expectations—like inflation expectations—that sometimes work to pressure the central bank. But we are not under any pressure to go for the next step. The next course has to be taken very carefully. As for inflation, I had said in my monetary policy statement very clearly that September and October inflation prints are expected to be higher. September came at 5.5%. October CPI numbers are again going to be very high, perhaps higher than the September number. So we had warned about it in my monetary policy statement. Our communication is fairly consistent.

The market has a right to ask questions. I'm happy that you asked questions. I hope to the treasury managers I have made our position now sufficiently clear.

I think it's the RBI logo, which is a tiger. The tiger is known for two things: strength and agility. Today the Indian economy has strength, and RBI continues to be agile. So the logo of RBI says it all.

It's for keen observers of RBI over the years to say that. But if you ask me, I think I would say the inherent strength of Team RBI, their analysis of situations, their proactiveness and agility. It is the strength of the team. For me, perhaps my long experience of having worked in the finance sector. Our effort is always to be proactive, to try and read the situation, identify potential risks, and act in time before the water spills over. We have tried to be as proactive as possible. For example, when a mutual fund scheme during the peak of the pandemic collapsed on a Thursday, we were aware it was happening and monitoring it. We saw the market response on Friday. Saturday and Sunday we worked. Monday when the market opened, we announced liquidity support of 50,000 crore and the problem settled down. Our endeavor is to act preemptively, to remain agile, and to identify potential risks before they become too big. The effort is to constantly look around and see what are the possible risk buildups. This has worked. All stakeholders in the financial sector have also equally contributed to what the Indian macro-financial sector is today.

Dr. Y.V. Reddy was an eminent central banker not only in India but internationally. I have a lot of respect and regard for Dr. Reddy and his contribution to India's financial sector and RBI. But coming to your point, one of the basic things you learn in civil service is the art of saying no.

Every catch is as serious and important as the previous one. Sometimes you drop an easy catch out of carelessness; sometimes you take very difficult catches. But about my splint, not to worry—I can still take a catch today. Each challenge looks bigger than the previous one, so it's difficult to say which was bigger. Never underestimate a challenge.

That's almost like asking a question in some contest; it's a googly. Let me try and play it. We started quoting Mahatma Gandhi when the COVID pandemic started. The first few announcements I remember: end of March, 27th March, then 17th April, 22nd May, and 5th or 6th August. These were very important dates. Every Mahatma Gandhi quote was contextual. Something we want to convey in a particular meeting, and we find a quote from Mahatma Gandhi appropriate for the occasion. My favorite quote perhaps is from the first few quotes during COVID, around March, April, May. There was a crisis of confidence, a lot of anxiety, a nationwide lockdown, and all activity had come to a standstill. Financial markets were anxious about what would happen. Our job was to give confidence to the markets by words and action—cutting rates, announcing moratorium, giving liquidity support. Our communication also had to be appropriate. The spirit was to build confidence and address their anxiety. I remember a quote from Mahatma Gandhi: 'When the horizon is the darkest, it is faith that prevails and comes to your rescue.' Another: 'In the midst of death, life persists; in the midst of darkness, light persists.' The idea was to give confidence. So the favorite quotes were from that period. Our selection is always contextual and appropriate for the occasion.

Thank you. I would like to once again thank Business Standard and convey my best wishes on their momentous 50-year journey. My best wishes to all the participants from the BFSI sector. The macro-financial stability of the country depends as much on you as on us and other policymakers. There has to be continued cooperation between the regulator, sector stakeholders to keep our financial sector healthy and future ready.

Thank you very much to Business Standard for this precious event. It has become a landmark event in financial sector discussions and policy forums. I would like to complement Business Standard for attaining their 50th year. I just got a glimpse of earlier editions; Business Standard started in 1975, and my congratulations to the entire team on their journey over the last 50 years. Now coming to your question, Tamal is a very clever bowler. Why do you know—some batsmen, I'm not saying I'm great, but some great batsmen get out to a bowler who appears to be ordinary but not actually ordinary, because you tend to become casual and go out and hit, and in the process get caught. So never underestimate the bowler is the principle. Never underestimate the person quizzing you, because you will stumble at a point when you become overconfident. On a serious note, there are two major international events awaited by markets, particularly financial markets: one was the US elections, and the second was the announcement from China about the fiscal policy support they are expected to announce. Depending on the size and depth of the Chinese stimulus, what it means for the Chinese economy and the rest of the global economy in terms of Chinese demand and contribution to global growth. That is one event awaited keenly. The other is the US elections, results of which are coming out. In an election, it's always better and prudent to wait till the entire counting process is over, because till the end it can go either way. So I will refrain from saying who is going to win. But two things are very clear overall, not just about the financial sector or trading sector but also geopolitically: India-US relations are stronger; there is a strategic partnership between the two countries that will continue regardless of who comes to power. This is common sense. Irrespective of global developments, the outcome of the US elections, and the spillovers for the rest of the world, the Indian economy and financial sector are today well placed and very resilient to deal with any spillover from the external world. We are impacted definitely by what's happening in the rest of the world; we are not bystanders there. But when it comes to our domestic market, we are not bystanders; we are very much in the market. Our overall financial sector and Indian macroeconomy and macro-financial conditions are today very resilient to deal with spillovers compared to many other countries.