Shaktikanta Das
| Photo Credit: Thulasi Kakkat

RBI Governor Shaktikanta Das on Monday (November 18, 2024) asked banks to proactively monitor their portfolios, identify areas of over-concentration, and take pre-emptive measures to address potential risks and challenges.

The Governor also asked bank boards to strengthen the internal governance framework to curb unethical practices, such as mis-selling of products or opening of accounts without proper KYC verification.

In a keynote address at the Conference of Directors of Private Sector Banks, Mr. Das said bank boards need to continuously assess external factors like regulatory changes, shifting market winds, overall macroeconomic changes and advances in technology.

“Boards should also be fully cognisant of the organisation’s internal strengths, vulnerabilities, and operational conditions so that they have a clear situational awareness,’ he said.

The Governor stressed that boards must be cognizant of build-up of concentrations in their business model.

Excessive reliance on specific sectors, markets, or customer segments can expose the bank to amplified risks, particularly in times of economic stress or industry shifts, he said.

“Boards can play a proactive role by regularly monitoring the bank’s portfolios, identifying potential areas of over-concentration, and taking pre-emptive steps to maintain a balanced approach,” Mr. Das added.

The boards, he said must also remain vigilant to operational risks, particularly those arising from IT outsourcing and reliance on third-party vendors.

He also said that the incentives for bank staff should be carefully structured so as not to encourage them to indulge in unethical practices.

“While such practices may yield short-term gains, they ultimately expose the bank to significant long-term risks, including reputational damage, supervisory scrutiny, and financial penalties,” he said in a keynote address at the Conference of Directors of Private Sector Banks.

He further said the Indian banking sector is transitioning through a time which is replete with opportunities as well as risks and challenges.

“The banking sector remains strong and stable. All the financial indicators have improved since we met in May last year, reflecting the efforts of the various participants of the banking sector, including their management and boards,” Mr. Das said.

To keep the resilience of the banking system intact, the Governor emphasised that strong fundamentals ought to be leveraged to reinforce and fortify the defences.

“Good times, after all, are the best times to reinforce resilience and grow sustainably,” he added.

Mr. Das also said that in the rapidly evolving and technology-driven environment, organisations face significant challenges and risks.

Factors like technological advancements, the rise of new-age fintech entities, third-party dependencies and climate change are reshaping the economic landscape, he added.

Amid these shifting tides, bank boards should serve as a lighthouse for lenders and provide steady guidance to help navigate these challenges and steer towards safe and prosperous shores, he said.

Mumbai:

The growing use of artificial intelligence and machine learning in financial services globally can lead to financial stability risks and warrants adequate risk mitigation practices by banks, the Governor of the Reserve Bank of India said on Monday.

“The heavy reliance on AI can lead to concentration risks, especially when a small number of technology providers dominate the market,” Shaktikanta Das said at an event in New Delhi.

This could amplify systemic risks as failures or disruptions in these systems may cascade across the financial sector, Das added.

India’s financial service providers are using AI to enhance customer experience, reduce costs, manage risks and drive growth through chatbots and personalised banking.

The growing use of AI introduces new vulnerabilities like increased susceptibility to cyber-attacks and data breaches, Das said.

AI’s “opacity” makes it difficult to audit and interpret algorithms which drive lender’s decisions and could potentially lead to “unpredictable consequences in the market,” he warned.

Separately, Das said private credit markets have expanded rapidly across the globe with limited regulation, posing significant risks to financial stability, particularly since these markets have not been stress-tested in a downturn.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Mumbai:

Prime Minister Narendra Modi on Friday said the government is taking various measures at the policy level to promote the fintech sector, which attracted over USD 31 billion in investments in the last 10 years, and the abolition of the Angel Tax is also a step towards the growth of the segment.

Addressing the Global Fintech Fest 2024 here, the Prime Minister also asked the regulators to take more measures to stop cyber fraud and further increase digital literacy among people.

“Fintech has played a significant role in democratising financial services,” he said, and expressed confidence that it will help in improving the quality of life for Indians.

PM Modi emphasised that the adoption of fintech by Indians is “unmatched in speed and scale” and no such example can be found anywhere else in the world.

He said the transformation brought about by the fintech sector in India is not just limited to technology, but its social impact is far-reaching.

He also stressed that fintech has dented the parallel economy and is bridging the gap between villages and cities on the financial services front.

The Prime Minister also said that in the last 10 years, the fintech space has attracted investments of more than USD 31 billion and fintech startups have grown by 500 per cent.

He said it is festive season in India, and there is also festivity in the economy and markets, in an apparent reference to the robust GDP growth and capital market scaling new highs.

PM Modi also informed the gathering that loans worth over Rs 27 lakh crore have been disbursed under the Pradhan Mantri MUDRA Yojana, the world’s largest microfinance scheme.

Speaking at the event, RBI Governor Shaktikanta Das said, digital technologies have been instrumental in expanding financial inclusion, improving efficiency and enabling real-time services across the country.

“Today, India stands as a global leader in digital payments, a feat achieved by combining proactive policy-making with innovation and technological advancements. Collaboration between policymakers, regulators and innovators is the defining element of India’s Fintech journey,” Mr Das said.

The Reserve Bank’s regulatory frameworks have facilitated new and innovative businesses to grow in an orderly manner, he said.

“These regulatory initiatives reflect our commitment to support innovation with prudence. Our collaborative approach is visible in the fact that we have held a large number of interactions over the last one year with the Fintech sector players,” he said.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Detailed instructions regarding addition of new DLAs or deletion of any existing DLA, shall be issued shortly,” RBI governor Shaktikanta Das said.
| Photo Credit: Reuters

To aid borrowers in verifying the claim of Digital Lending App’s (DLAs) association with Regulated Entities (RE), the Reserve Bank of India (RBI) is creating a public repository of DLAs deployed by the REs which will be available on RBI’s website.

“The repository will be based on data submitted by the REs (without any intervention by RBI) directly to the repository and will get updated as and when the REs report the details, i.e., addition of new DLAs or deletion of any existing DLA. Detailed instructions in this regard shall be issued shortly,” governor Shaktikanta Das announced on Thursday (August 8, 2024).

RBI Monetary Policy Meeting: RBI keeps repo rate unchanged at 6.5%

Guidelines on Digital Lending addressing protection of customers’ interest, data privacy, concerns on interest rates and recovery practices, mis-selling, etc. were issued on September 02, 2022.

“However, media reports have highlighted continued presence of unscrupulous players in digital lending who falsely claim their association with RBI regulated entities,” he said.

The Reserve Bank has ventured into Artificial Intelligence (AI) and Machine Learning (ML) analytics in multiple areas in order to develop cutting-edge systems for high frequency and real-time data monitoring and analysis, RBI Governor Shaktikanta Das said today.

In his address at the inauguration of the RBI’s 18th Statistical Day Conference, Governor Das said: “The focus now is naturally on enhancing capacity in AI and ML techniques and analysing unstructured textual data. While doing so, ethical considerations need to be addressed and biases in algorithms need to be eliminated.”

He said that this annual event provides an opportunity to reflect on the current and evolving state of the statistical system. It also helps to take stock of the refinements in the application of statistical methods and technologies in the realm of public policy.

“Looking ahead, the year 2025 has a special significance for the compilation of official statistics the world over. Global efforts are expected to culminate in new global standards for the compilation of macroeconomic statistics, especially for national accounts and balance of payments. Our team in the Reserve Bank is closely tracking these developments,” the RBI Governor said.

The surge in computing power is being increasingly harnessed in combination with statistical methods to improve efficiency in decision-making and enrich end-user experience in various fields of human knowledge, he added,

The celebration of Statistics Day in India coincides with the birth anniversary of Professor Prasanta Chandra Mahalanobis whose contributions in laying the foundations of modern-day official statistics in India have been pioneering. Inspired by his work, Indian statisticians are making their presence felt – both domestically and globally in traditional as well as in newer applications of statistics, he added.

Governor Das highlighted the areas in which the Reserve Bank’s cutting-edge information management is contributing to the formulation of public policies and the overall economic development in India.

“One year ago, we launched our next-generation data warehouse, i.e., the Centralised Information Management System (CIMS) at the Statistics Day Conference. Several new features were introduced in the new system. Scheduled commercial banks (SCBs), urban co-operative banks (UCBs) and non-banking financial companies (NBFCs) have already been onboarded for reporting on the new portal,” he said.

The new CIMS is also facilitating research on the Indian economy, minimising reporting burden, exploiting the technological advances and improving the experience of both data providers and users, Governor Das added.
 

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Mumbai:

Reserve Bank Governor Shaktikanta Das today said India has been building up gold reserves as part of its forex deployment.

“We are building up gold reserves that is a part of our reserve deployment,” Governor Das told reporters at the customary post-policy review press conference.

He did not give any specifics on the quantum of gold buys, but pointed to the official data which shows an increase in the value of gold reserves.

As per official data, the value of gold in the forex reserves stood at USD 51.487 billion as on March 22, which is USD 6.287 billion higher than the value as at end-March 2023.

As per a recent news report, RBI bought 8.7 tonne of gold in January alone which is the highest in two years.

The central bank’s gold holdings had touched 812.3 tonne at the end of January from 803.58 tonne in the preceding month, as per the World Gold Council. The price of gold has also seen a rally over the last few months.

Earlier in the day, Governor Das announced that the overall forex reserves have touched an all-time high of USD 645.6 billion as of March 29, a breakup of which will be made available on Friday evening with the release of the weekly statistical supplement (WSS).

Speaking to reporters, Governor Das said RBI has consciously focused on building forex reserves over the last four-five years to act as a buffer against any future risks where there are dollar outflows from India.

He also said the central bank’s approach on the forex front adds strength to the national balance sheet as well.

Governor Das also said that having a stable rupee is a priority for the Reserve Bank.
 

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

The retail inflation in February was 5.1%, while inflation in the food basket was at 8.66%.

The Reserve Bank of India (RBI) on April 5 said food price uncertainties continue to weigh on the inflation trajectory going forward, even as it retained 4.5% retail inflation projection for the current fiscal.

In its first bi-monthly monetary policy for current fiscal, the RBI said notwithstanding the cut in petrol and diesel prices in mid-March 2024, the recent uptick in crude oil prices needs to be closely monitored.

“Continuing geopolitical tensions also pose upside risk to commodity prices and supply chains,” RBI said. “Assuming a normal monsoon, CPI inflation for 2024-25 is projected at 4.5%,” RBI governor Shaktikanta Das said.

RBI Monetary Policy updates | Policy repo rate unchanged at 6.5%; real GDP growth for FY25 projected at 7%

Although RBI retained the full year inflation projection, it tweaked the forecasts for the quarter. RBI forecast April-June quarter inflation at 4.9% and in September quarter at 3.8%.

For December and March quarters, inflation is projected at 4.6% and 4.7%, respectively. The RBI said that deflation in fuel is likely to deepen in the near term, following the cut in LPG prices in March.

The government last month announced a steep cut of ₹100 in cooking gas LPG prices to ease the financial burden on households. Also, public sector oil retailers cut petrol and diesel prices by ₹2/litre, ending a nearly two-year-long hiatus in rate revision.

“Food price uncertainties continue to weigh on the inflation trajectory going forward. A record rabi wheat production would help temper price pressure and replenish the buffer stocks. Moreover, early indication of a normal monsoon augurs well for the kharif season,” RBI said.

RBI said inflation has come down significantly but remains above the 4% target. Food inflation continues to exhibit considerable volatility impeding the ongoing disinflation process.

“Our ongoing effort is to ensure fuller transmission of policy actions and anchoring of household inflation expectations. The strong growth momentum, together with our GDP projections for 2024-25, give us the policy space to unwaveringly focus on price stability,” RBI said.

The RBI has the mandate to contain retail or consumer price index (CPI) inflation at 4%, within a band of +/-2%. Mr. Das said two years ago, around this time, when CPI inflation had peaked at 7.8% in April 2022, the elephant in the room was inflation.

“The elephant has now gone out for a walk and appears to be returning to the forest. We would like the elephant to return to the forest and remain there on a durable basis.”

“In other words, it is essential, in the best interest of the economy, that CPI inflation continues to moderate and aligns to the target on a durable basis. Till this is achieved, our task remains unfinished,” Mr. Das said.

The retail inflation in February was 5.1%, while inflation in the food basket was at 8.66%. For the 2023-24 fiscal, RBI has projected average retail inflation at 5.4%.

The spike in food prices has kept the Reserve Bank of India (RBI) worried even though overall inflation has moderated to a certain extent.

On April 5, the Central bank’s Monetary Policy Committee decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.50%. This is the seventh time that the rates have been kept on hold.

“The Monetary Policy Committee (MPC) remains focused on aligning inflation to the target on a durable basis. We derive satisfaction from the progress made under disinflation. But the task is not yet finished,” RBI Governor Shaktikanta Das said at a press conference after the MPC meeting.

RBI Monetary Policy updates | Policy repo rate unchanged at 6.5%; real GDP growth for FY25 projected at 7%

The MPC also decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target, while supporting growth.

Food price uncertainties

In his monetary policy statement, Mr. Das said, “Food price uncertainties continue to weigh on the inflation trajectory going forward. A record rabi wheat production would help temper price pressure and replenish the buffer stocks. Moreover, early indication of a normal monsoon augurs well for the kharif season.”

“International food prices also remain benign. The tight demand supply situation in certain categories of pulses and the production outcomes of key vegetables warrant close monitoring, given the forecast of above normal temperatures in the coming months,” he said.

“Frequent and overlapping adverse climate shocks pose key upside risks to the outlook on international and domestic food prices,” he said, adding that as per the Indian Mereological Department’s forecast, the months of April, May, and June will witness above normal maximum temperatures in most parts of the country. 

Volatile food inflation

Answering a question on what is fuelling food inflation, RBI Deputy Governor Michael D. Patra told The Hindu, “Food inflation has been highly volatile. In February 2024 it was 7.8% and the indications are that in view of adverse climate events recurring, it will remain high.”

“The actors keep shifting. Sometime it is cereals, then vegetables and currently it is protein which is eggs, meat and fish. There is some firmness in rice prices,” he said. “These are short duration spikes but since they occur on multiple occasions, they give a persistent character. So what we are worried about is that there should not be any spillover to the rest of the CPI. So we remain watchful, very closely.” Mr. Patra added.

Growth-inflation dynamics

Overall inflation has been controlled to a certain extent; since the last policy, the growth-inflation dynamics have played out favourably.

While growth has continued to sustain its momentum, surpassing all projections. headline inflation has eased to 5.1% during January and February 2024 from 5.7% in December 2023, with core inflation declining steadily over the past nine months to its lowest level in the series, Mr. Das said in his monetary policy statement.

He added that the fuel component of the CPI remained in deflation for six consecutive months; food inflation pressures, however, accentuated in February.

“Looking ahead, robust growth prospects provide the policy space to remain focused on inflation and ensure its descent to the target of 4%. As the uncertainties in food prices continue to pose challenges, the MPC remains vigilant to the upside risks to inflation that might derail the path of disinflation,” he said.

“Under these circumstances, monetary policy must continue to be actively disinflationary to ensure anchoring of inflation expectations and fuller transmission of the past actions. The MPC, therefore, decided to keep the policy rate unchanged at 6.50% in this meeting and remain focused on withdrawal of accommodation. The MPC will remain resolute in its commitment to aligning inflation to the target,” he added.

Fuel price deflation

Mr. Das said that cost push pressures faced by firms were seeing an upward bias after a period of sustained moderation.

“Deflation in fuel is likely to deepen in the near term, following the cut in LPG prices in March. Notwithstanding the cut in petrol and diesel prices in mid-March, the recent uptick in crude oil prices needs to be closely monitored. Continuing geo-political tensions also pose upside risk to commodity prices and supply chains,” he said.

Assuming a normal monsoon, CPI inflation for 2024-25 is projected at 4.5% with Q1 at 4.9%; Q2 at 3.8%; Q3 at 4.6%; and Q4 at 4.5% . The risks are evenly balanced.

Growth prospects

Around this time two years ago, when CPI inflation had peaked at 7.8% in April 2022, the elephant in the room was inflation, Mr. Das said. “The elephant has now gone out for a walk and appears to be returning to the forest. We would like the elephant to return to the forest and remain there on a durable basis. In other words, it is essential, in the best interest of the economy, that CPI inflation continues to moderate and aligns to the target on a durable basis. Till this is achieved, our task remains unfinished,” he said.

On growth prospects, the Governor said that headwinds from geopolitical tensions, volatility in international financial markets, geoeconomic fragmentation, rising Red Sea disruptions, and extreme weather events pose risks to the outlook.

Taking all these factors into consideration, real GDP growth for 2024-25 is projected at 7%, with Q1 at 7.1%; Q2 at 6.9%; Q3 at 7%; and Q4 at 7%. The risks are evenly balanced.

Reserve Bank of India Governor Shaktikanta Das.
| Photo Credit: PTI

The Reserve Bank of India (RBI) on February 8 projected GDP growth for the next financial year at 7% on the back of improved household consumption and upturn in private capex cycle.

The real GDP growth is, however, lower than 7.3% estimated by the National Statistical Office (NSO) for the current 2023-24 fiscal aided by strong domestic economic activity and investments. The Indian economy grew 7.2% in 2022-23 fiscal.

In its Monetary Policy Statement, 2023-24, RBI Governor Shaktikanta Das said the recovery in rabi sowing, sustained profitability in manufacturing and underlying resilience of services should support economic activity in 2024-25.

“Among the key drivers on the demand side, household consumption is expected to improve, while prospects of fixed investment remain bright owing to upturn in the private capex cycle, improved business sentiments, healthy balance sheets of banks and corporates; and government’s continued thrust on capital expenditure,” Mr. Das said.

The improving outlook for global trade and rising integration in the global supply chain will support net external demand. The RBI flagged headwinds from geopolitical tensions, volatility in international financial markets and geo-economic fragmentation as risks to growth outlook.

“Taking all these factors into consideration, real GDP growth for 2024-25 is projected at 7% with Q1 (April-June) at 7.2%; Q2 at 6.8%; Q3 at 7% and Q4 at 6.9%. The risks are evenly balanced,” Mr. Das said.

To keep inflation within the targeted 4% (+/-2%) band, the RBI on February 8 retained benchmark interest rate or repo at 6.5%.

The interest rate setting monetary policy committee (MPC) also decided to remain focussed on withdrawal of accommodation to ensure that inflation progressively aligns to the target, while supporting growth.

“Global growth is likely to remain steady in 2024 after a surprisingly resilient performance in a turbulent year gone by. Inflation is edging down from multi-decade highs, with intermittent upticks,” Mr. Das said.

Mr. Das said rural demand in India continues to gather pace, urban consumption remains strong and investment cycle is gaining steam on the back of increased capex. Also, there are signs of revival in private investments.

Reserve Bank of India Governor Shaktikanta Das. File
| Photo Credit: PTI

Digital Rupee users will soon be able to execute transactions in areas with limited internet connectivity as the Reserve Bank of India (RBI) on February 8 announced that offline capability will be introduced on the Central bank digital currency (CBDC) pilot project.

RBI Governor Shaktikanta Das said that programmability-based additional use cases will be introduced as part of the pilot project. RBI launched a pilot of the retail CBDC in December 2022 and achieved the target of having 10 lakh transactions a day in December 2023.

It can be noted that other payment platforms, especially the very popular Unified Payments Interface (UPI), already offer offline possibilities.

“It is proposed to introduce an offline functionality in CBDC-R (Retail) for enabling transactions in areas with poor or limited internet connectivity,” Mr. Das said while announcing the bimonthly monetary policy review.

He said multiple offline solutions, which include both proximity and non-proximity based ones, will be tested across hilly areas, rural and urban locations for the purpose.

On the programmability front, he said that currently, the system enables Person to Person (P2P) and Person to Merchant (P2M) transactions using digital rupee wallets provided by pilot banks.

“It is now proposed to enable additional use cases using programmability and offline functionality,” he said.

“The programmability feature will permit users such as government agencies to ensure that payments are made for defined benefits,” he said, adding that corporates will also be able to programme specified expenditures like business travel for their employees.

“Additional features such as validity period or geographical areas within which CDBC may be used can also be programmed,” he said.

Meanwhile, Mr. Das also announced RBI’s intent to enhance the security features of Aadhaar enabled Payment Systems (AePS), which was used by 37 crore people in 2023.

“To enhance the security of AePS transactions, it is proposed to streamline the onboarding process, including mandatory due diligence, for AePS touch point operators, to be followed by banks,” Mr. Das said, adding that instructions on the same will be issued shortly.

At present, Mr. Das said lenders are using the SMS method for complying with the additional factor authentication requirements but advancements in technology have opened up newer means.

“To facilitate the use of such mechanisms for digital security, it is proposed to adopt a principle-based “Framework for authentication of digital payment transactions”,” he said.