Less restrictive policy stance limited to current MPC meet, says RBI Governor

Is a less restrictive stance limited to this MPC meeting?

Governor: Obviously. We are keeping a neutral stance. The tremendous uncertainties that we are facing today, it does not call for us to change our stance. This less restrictive policy is only for this particular MPC meeting and not going forward. This stance continues to be neutral.

Would your stated policy be to keep liquidity surplus in the interbank system or just adequate?

Governor: It has been the endeavour of RBI to provide as much liquidity as required. And when we say liquidity, it is both overnight and durable liquidity. We have taken a number of steps. We introduced, perhaps for the first time, every day overnight repo rate operation. This was primarily to give confidence to everyone that this window is always available. Even for the longer-term durable liquidity, we have announced steps of about ₹1.5 lakh crore. We are always watchful, will be nimble and very proactive in providing whatever liquidity requirements are needed.

What gives you the optimism to achieve 6.7 per cent GDP growth next year?

Governor: We analyse all the parameters very regularly. Whether one looks at agriculture or consumption or the manufacturing activity, it is also picking up. All this gives us the optimism that we will meet the numbers we have projected. We will continue to improve our macroeconomic models, our now-casts and forecasts, so as to be able to give as precise a number as possible. Please bear in mind that these are just forecasts. Every day situations change and when your facts change your opinions also change.

Do you believe India can achieve over 7 per cent GDP growth rate?

Governor: I would like to stick my neck out and say that certainly India can achieve 7 per cent plus growth rate. We should certainly aspire for that.

Has the RBI now started considering cost of regulation while taking decision?

Governor: It is not correct on my part to talk about the past actions. I would certainly say that RBI as an institution has been able to carry out its mandate. I do think that the cost of regulation, you may not have heard of it, but consciously this would certainly have been a factor in determining they are going to do. It’s not only about financial stability but also about the cost at which these things come in. I only made it very clear so everyone is assured about it.

How concerned are you about rupee depreciation and imported inflation?

Governor: The rate that rupee settles at, is a function of the demand and supply. Even though it is our job, we should not really be looking at a day-to-day kind of a volatility. It is about more the long-term rate that we should be looking at. I say this not only for the rupee, but also for other asset classes, whether it is the Sensex or the Nifty, or gold prices. Day-to-day movements may not be important. As I mentioned, this was certainly factored in while deciding on the rate cut and stance. A depreciated rupee certainly puts pressure on inflation, but at the same time, I think a higher worry for us would be the global uncertainties as to how that pans out. So global uncertainties, even if the tariff trade wars were not to carry out, but just the uncertainty in itself is something which is worrisome. As that has direct impact on growth, investment decisions, and consumption expenditure decisions which get deferred. The appreciation of the dollar and the depreciation of the rupee is actually linked to this uncertainty.

Does heightened global uncertainty make a case for RBI to raise its contingency risk buffer?

Governor: The Biman Jalan committee has given recommendation to maintain 5.5-6.5 per cent of our balance sheet as a buffer for us. We were at 6.5 per cent as on March, 2024. The overall framework is being reviewed by an internal RBI committee. Basis that review, if the committee feels that there is any change, could be upward or downward, I’m not suggesting that because of some uncertainties it needs to be increased, we will take a decision.

Does Trump’s pro-crypto stance worry India?

Deputy Governor T Rabi Sankar: The RBI’s thinking on cryptocurrencies has been articulated very clearly. And there is no change in that thinking. Our thinking is based on what our understanding of crypto is. Our understanding of cryptos will not change because of some other country’s policy. Having said that, there is a group reviewing what the country’s approach to cryptocurrencies will be. Basis their recommendations, the government will take a decision, and we will follow it.