'We Are Always Watchful. We Will Be Nimble'

'We will be very, very proactive in providing whatever liquidity requirements are needed.'

Reserve Bank of India Governor Sanjay Malhotra, along with Deputy Governors M Rajeshwar Rao, T Rabi Sankar, and Swaminathan J, responded to a range of issues pertaining to monetary policy and the financial sector during a post-policy media interaction.

Rate cuts normally get passed on when liquidity is surplus. Would your stated policy be to keep liquidity surplus in the interbank system or just adequate?

Malhotra: You would have observed in the past couple of months and even before that, it has been the RBI's endeavour to provide as much liquidity as is required.

When we say liquidity, it is both overnight as well as durable. We have taken a number of steps.

We are always watchful. We will be nimble. I want to assure that we will be very, very proactive in providing whatever liquidity requirements are needed.

Is it fair to say that the priority at this point in time is growth over inflation?

The RBI Act has given us a very, very clear mandate. For some countries, as you are aware, it is a dual objective.

In our case, the primary objective is inflation and price stability, keeping in view the growth objective. So, we will continuously focus on that.

At present, as the resolution also says, we felt that time has come we can be more supportive of growth because inflation is coming down. It is expected to go down.

However, it also says we will maintain a neutral stance so that we are able to proactively respond to the evolving macroeconomic conditions.

What is the real rate according to you, given the current growth inflation dynamics?

Today, we are at 6.25 per cent (repo rate) and the (CPI) inflation is 5.2 per cent. The wholesale price index-based inflation is lower.

So, that would give you a real rate of about one-and-a-half per cent or so.

Is "less restrictive monetary policy" limited to the current MPC?

The tremendous uncertainties that we are facing today does not call us to change our stance. The stance remains neutral.

This less restrictive policy is only for this particular MPC meeting and not going forward.

Is 7 per cent plus growth rate achievable?

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

There are banks still waiting to come out of restrictive business policies. Would you rethink your approach on how banks would, how you would want to target banks or work with them to rectify some of the failings?

These measures are taken after great consideration, after great thought, after giving opportunity to these entities.

This is a measure of last resort to be used in the rarest of the rare circumstances, where, when, all other measures have actually failed.

They are again in the interest of the public, and we will keep this policy going forward as well.

Is the RBI changing its perception of being an iron fist type of a regulator?

It will not be correct to sit on judgement about the past. But I would certainly say that the RBI, as an institution, has been able to carry out the mandate that has been given to it.

I do think that while you may not have heard of it, the cost of regulation certainly would have been a factor in determining what it is going to do.

All factors are considered while making any regulations. It is not just about financial stability but also the cost at which these things come in.

Will the tax incentive in the Budget have an impact on inflation?

I do not think the Rs 1 trillion tax incentive is going to have an impact on inflation.

Overall, I think this is an excellent Budget, both from a growth perspective as well as, I would say, from the inflation perspective.

Is the RBI going to change its crypo stance because of the Trump presidency?

T Rabi Sankar: The RBI's thinking on cryptocurrency has been articulated very clearly and there is no change in thinking because it is based on what our understanding of crypto is.

Our understanding of crypto will not change because of some policies undertaken by some countries.

Having said that, there is a group, what the country's approach to cryptocurrency should be and that group will give its recommendations based on which the decision will be taken by the government and we will all follow that.

We see a lot of stress and overleveraging in MFI entities.

Swaminathan J: If you read the same regulatory instruction that we brought on November 23, we excluded the growth-oriented sectors like housing or vehicle loans or education loans.

We also excluded the small borrowers from the burden of any additional compliance. So, at this point in time, there is no other further measure that is contemplated.

For handling the stress, there are other methods to prescribe and handle entities where there are any outlier numbers. But a macro-prudential measure at this point is not under our contemplation.

Feature Presentation: Ashish Narsale/Rediff.com