The governor said there was already a rebalancing of liquidity in the money markets, but as long as the central bank maintains its accommodative stance, there will be a surplus of funds.
“Energy, steel and commodity prices have risen, but some analysts believe they are at their peak,” he said. We expect this to be in line with our estimate of 5.3% as the positive growth from reduction in petrol/diesel is not taken into account,” he said. He was speaking during a fireside chat at a banking summit organized by a business daily.
Das, however, cautioned against global developments. “Global headwinds are coming. Growth in most developed and advanced economies, which was positive till Q2, has moderated. Global growth to the 5.9% target could fall short of semiconductors and shipping containers. Freight and commodity prices have gone up. Covid is a growing concern in some countries in Asia and the West,” Das said.
On retail loans overtaking corporate loans for the first time, Das said banks need to assess risks appropriately and decide how much risk they want to take in each sector. “What percentage should go to retail and housing is up to the bank boards to determine and allocate risk,” Das said.
Pointing to the rise in home loans, Das said it was a combination of a record fall in interest rates along with rising demand for larger homes due to the pandemic. Also, Das said the move by corporates to the bond market was a positive development.
“In the last one year, corporates have received more funds from the bond market than from bank funding. This is a positive development. When they go to market, the market will decide the risk and price of the bond. As far as bank credit is concerned, our interactions suggest that there are signs of an uptick in investments. He said his response from talks with banks was that credit would pick up from next year.
On withdrawing the liquidity that has flowed during the pandemic, Das said the measures were designed for a limited period and liquidity would be re-balanced. He said the reduction in the cash reserve ratio has brought back the released funds and part of the long-term repo operations has also come back. NS reserve Bank of India It was injecting an amount of less than Rs 7 lakh crore through its reverse repo window.
“So, the liquidity is getting rebalanced. As long as the policy stance is favourable, liquidity will remain in surplus, but the excess liquidity will get rebalanced,” he said.
Das said that despite the expansion of the RBI’s balance sheet, the need to infuse capital into the central bank was “a situation that would not arise”.
Das again cautioned against cryptocurrencies and said that the investor base numbers in India were inflated. “Crypto, by whatever name you call it, is a serious concern from the point of view of macroeconomic and financial stability. How to deal with this issue, we have given recommendations to the government. Yes, in terms of quantity and amount invested The numbers are increasing in the U.S. but the number of investors, from the understanding I have, I’m not sure the numbers are being quoted,” Das said.
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