RBI Governor Shaktikanta Das today said that the announcement of maintaining the status quo on policy rates should be considered as a pause and not a pivot.
Addressing the post-monetary policy press conference in Mumbai this afternoon, Mr. Das said the effective rate hike has been 290 basis points in the last year and the monetary policy committee thought it was necessary to pause and assess its cumulative impact.
Emphasizing that RBI is focused on ensuring price stability at this point given the stable macroeconomic situation, Mr. Das said RBI remains watchful and will not hesitate to take necessary action as and when required.
The governor clarified that India’s policy rates have never coupled with the US FED rates and are determined by domestic factors.
Mr. Das said that the policy remains forward-looking with an inflation target of 4 per cent, adding that the policy stance of withdrawal of accommodation aligns progressively with the target.
The RBI Governor said he is optimistic about the Indian economy as the country’s growth momentum remains resilient. He said RBI adopts a prudent approach while deciding rates.
Talking about India’s digital payments system, the RBI Governor said the system has recorded phenomenal progress in recent times.
Stating that United Payments Interface – UPI and Central Bank Digital Currency evoked a lot of interest during the recent G20 meeting of financial ministers and central bank governors that was held in Bengaluru.
Mr. Das said RBI is holding discussions with National Payments Corporation of India for increasing the footprint of UPI in international markets.
On e-rupee or the CBDC, Mr. Das said an eminent person from the financial sector complemented its design during the G20 meeting and said, all that he missed in the system was just the smell of a new currency note.
Issuing further clarity on RBI’s proposal to permit operations of pre-sanctioned credit lines by banks through UPI, the RBI Governor said it is just an expansion of the United Payments Interface.
Shrugging comparisons with the Buy Now, Pay Later- BNPL system, Mr. Das said the aim is to reduce the number of cards that a person needs to carry. He said that the move will work on a pre-sanctioned credit line, which will be available for transaction through UPI.
On a query regarding internationalizing the rupee, the RBI Governor said they have received a lot of interest from many central banks and countries.
He said the opportunities are being explored as stakeholders on both sides get used to it, adding that internationalizing the rupee is a long-term objective and will be achieved steadily.
RBI Deputy Governor T Rabi Shankar added that teething issues like low volumes are being sorted out even as many overseas banks are showing interest in using rupees for international transactions.
Talking about India’s priorities during the upcoming Spring Meeting of the IMF, Mr. Das said India would like to discuss the recent incidents of stress in the banking sector, especially in the US and Switzerland, the effect of climate RBI e change and climate finance, macro-financial risks from cryptocurrencies, better reporting of cybercrime, managing risks by big tech and fintech companies among other issues.