RBI Policy | Here’s what Governor Das and his deputies said on I-CRR, UPI and loans

Governor, so you've taken some measures on United Payments Interface (UPI). When will users actually get to see this happening?

Shaktikanta Das: Discussions are underway with a few countries, including some advanced economies, for linking their payment systems with the UPI. These are countries which have evinced interest in linking to the UPI.

The UPI has now become internationally recognised. I'm not saying it myself, but it is recognised very widely that the UPI is perhaps the most efficient and advanced payment system in the world. This is something which I am saying on the basis of our G20 meetings of the Finance Ministers and Governors, which were held recently and even earlier. So, this is work in progress. We are already in discussions with a few countries and it will happen.

The statement said that the RBI will review the reset of floating rate loans due to unreasonable elongation. How do you define unreasonable elongation, given the 250 bps rate hike by the central bank so far?

Deputy Governor Rajeshwar Rao: We are not considering defining what unreasonable elongation is. It is something which the board will have to consider, with regard to the tenure and the repayment capacity of individual borrowers. It is up to the board to decide what is a reasonable tenure, and increasing that beyond a particular period would be deemed as unreasonable, but it is left to the individual institutions to define it. We will not be defining it.

We have already discussed this with the CEOs of banks, and we have conveyed our concerns and what action we expect them to take. I think we will stop it with that.

Also read: In fight against inflation, MPC caught between a rock and a hard place

Can you tell us exactly how much more CRR will have to be maintained? What exactly is the extra?

Shaktikanta Das: We have done an internal calculation. We have done a bank-wise calculation also. It will be above Rs 1 lakh crore. Let me mention it that way. We have an exact number in our mind, but I don't want to say it because you know this initial figure requires further fine-tuning. It will be a little higher than Rs 1 lakh crore. And incremental CRR is applicable to all scheduled banks.

What will you consider when you tweak it (CRR) on September 8? Will you remove it on September 8? If not, what will you consider?

Shaktikanta Das: No. It will depend on the situation prevailing at that time. In between, so many things are there. The GST payments will happen, the government expenditures will happen... We have to watch the credit offtake from the banking sector also. So I cannot prejudge what we will do on September 8. But yes, we will review it on September 8 or even earlier, that is what I have mentioned.

We are always nimble in our liquidity actions. You would have seen that in the past. We have undertaken/we have the main operation of 14-day VRRR (variable rate reverse repo). As and when required, we have fine-tuned VRRR operations.

As and when required, we have also undertaken fine-tuning repo operations, whereby repo has been injected. So we monitor this situation constantly. And there have been two-way interventions, which we have done in the past. We are very nimble. And as far as the level of liquidity is concerned, it's a dynamic figure. I would not like to venture into giving a particular number.

Despite your repeated assertions, the actual inflation and (the targeted) 4 percent is still very far. Are you getting anxious about it? And how long are you going to wait before acting on it?

Deputy Governor Michael Patra: So if you recall, in May, the inflation rate actually aligned with the target and 4.3 is a comfortable level. But then, these food shocks came. They and their period of stay are unpredictable. We hope that this is a transitory phenomenon and it will come off when supplies improve, and they are improving already. So that's the thing.

It's just that there have been these food shocks which were unanticipated and we will see them off.

Is Russia investing in Indian government bonds and T-bills? And how much that could be?

Deputy Governor Rabi Sankar: Obviously, we can't say specifically about a country or any particular entity investing in government securities. It is allowed through the foreign portfolio investment (FPI) route. It can happen through the FPI route. It is allowed through the special vostro account route. So, the actual investment will happen only through these two routes. So about how much anyone has invested and how much exactly, you know, that's not something that we can say out publicly.

Also read: RBI rejects concerns over outflow of Russian investment in Indian debt

Is the incremental CRR the only tool that the RBI has when dealing with something that does not seem to be a big durable long-term liquidity problem?

Shaktikanta Das: You see, we have nowhere said that this is the only method. There are other methods, but in the current situation, according to our assessment, we felt that this was the appropriate action. This is the appropriate method at the current juncture. The Rs 2,000 notes have come back into the banking system. As we enter the festival season, the currency off-take, that is the currency in circulation usually picks up … I've said it in my statement. So, I have nowhere said that this is the only option. This was the best option under the circumstances. We have various options. As and when the situation requires, we will deal with it and we will undertake whatever measures are there.

What is the price of India's crude oil basket that has been assumed by the RBI in the latest inflation forecast? Has it changed from $85 per barrel? How much time does the RBI think it will take to withdraw the excess liquidity from the banking system?

Michael Patra: Our assumption on the oil basket has not changed since June.

Our assessment is that the measures that we've announced today will balance out liquidity. Our intention is not to withdraw all the liquidity, but to leave enough there for the credit needs of the economy. So, as of now, our assessment is that this should do the job. But it's a dynamic assessment and we will tell you again after September 8.