Speaking at the CNBC Global Leadership Summit, RBI Governor Shaktikanta Das addressed the complexities of the current global financial landscape. Despite a rise in government bond yields worldwide, particularly as many advanced economies adopt easing policies, he noted that global trade is expected to remain strong this year. Das highlighted India’s relatively stable financial system, which has helped the country navigate these global challenges smoothly.
Das also provided insights into India’s economic resilience and monetary policy. He highlighted India’s position as the holder of the world’s fourth-largest foreign exchange reserves, enough to cover 12 months of imports, demonstrating the country’s economic strength.
Reflecting on the RBI’s monetary stance, Das mentioned that the Monetary Policy Committee (MPC) shifted to a 'neutral' position in its October meeting. He discussed the ongoing dilemma central bankers face: balancing the timing and extent of intervention—doing "too little or too late" versus "too much and too early."
"The challenge for central bankers has always been between doing too little or too late on the one hand, and too much or too early on the other," he said.
Das acknowledged that the financial system will continue to encounter new challenges. Regarding the Expected Credit Loss (ECL) framework, he shared that the draft norms had been reviewed by an external committee, and the RBI has completed its examination of the findings. Additionally, Das emphasized the RBI’s focus on climate risk and its potential impact on the financial system, with updated norms expected to be released soon.
Talking about RBI’s exchange rate policy, Das said, "India has fourth largest foreign exchange reserves in world. It can cover 12 month of import. Our exchange rate policy is well articulated."
He noted that the RBI does not target band or exchange rate is well-defined, noting that the central bank does not target specific exchange rate bands. He referred to the exchange rate as a key indicator of the economy's health. Furthermore, he mentioned the stability of the weighted average call money rate, which aligns closely with the repo rate, reflecting effective monetary policy.
He also praised the RBI’s role in driving innovation in India’s payment systems, crediting the rise in banking digitization to initiatives like the Unified Payments Interface (UPI). Despite recent inflationary pressures, Das projected inflation to moderate in the near future. However, he reserved comments on any rate action until the December policy meeting.
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