The Reserve Bank of India’s (RBI’s) Monetary Policy Committee (MPC) cut the benchmark repo rate by 35 basis points to 5.4% in its August policy review on Wednesday, while maintaining an ‘accommodative’ stance. RBI governor Shaktikanta Das, in his interaction with the media after the policy meeting, made quite a few interesting statements, giving an insight into the central bank’s priorities and challenges going ahead. Take a look at some key excerpts from Shaktikanta Das’s conversation with journalists:
On interest rates
— Rate increase is off the table
— There is no proposal for a CRR (cash reserve ratio) cut at present
— Linking interest rate to an external benchmark is still under discussion
On the unconventional 35 basis points cut
— There was nothing sacred about multiples of 0.25 percentage point cuts
— The decision has not been taken on gut feel but on hard data
— Cutting repo rate by 25 bps was inadequate, while a 50 bps cut would have been excessive
— Too much should not be read into it, it is a judgement call which the MPC has taken
On growth and inflation
— The growth slowdown is not structural but cyclical
— This is not the time to look at real inflation, but to fill the output gap
— Confident of credit demand picking up and growth reviving
On banks and NBFCs
— We expect higher transmission of policy rates by banks in the coming weeks
— The system is ‘flushed’ with liquidity and hence the cycle of transmission by banks has begun
— RBI cannot tell banks who to lend to, but the banking regulator will ensure a good credit flow
— There is no cartelisation by banks in holding on to higher lending rates
— RBI’s endeavour is that none of the large non-banking lenders collapses
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