In the maiden monetary policy of the new Governor, Urjit Patel, the Reserve Bank of India, maintained that RBI will continue its liquidity stance by focusing on lowering the liquidity deficit. Unlike past governors, the RBI Governor, Urjit Patel does not hold complete authority over the monetary policy as the six-member Monetary Policy Committee (MPC) will decide on the monetary policy. The MPC cut the repo rate by 25 basis points (bps) to a six-year low of 6.25 per cent and the reverse repo stands adjusted at 5.75 per cent. The marginal standing facility rate and bank rate is adjusted to 6.75 per cent. Thus, maintaining the accommodative stance.
During the post monetary policy announcement at the press conference, Raghuram Rajan’s successor, Patel said, “NPA (non-performing assets) is an important issue for RBI in India. We plan to deal with the situation with firmness and pragmatism. So, that the economy does not feel any lack of credit for the growth of economy.” He also added that one cannot expect the change to take place overnight considering one needs skill and endeavour to deliver it.
The problem has been identified and recorded and now, RBI is working on resolving the issues, he added.
The RBI plans to follow the approach of the other central banks in terms of timing. Patel added that RBI did a scan of central banks and what we have introduced is a mid-afternoon policy decision as timing is broadly a norm elsewhere.
The policy decision by MPC was made on the backdrop of the macroeconomics situation like weak global growth; volatility in international financial markets; above normal monsoon; elevation of headline CPI; liquidity conditions and so on. Patel said, “For the first time in very long, the weak global demand is actually going to break down trade volumes to decline. It is possible that this week at the IMF meeting, there will be a further downgrading of global growth. I will be surprised if there is not,” he added.
The minutes of the first MPC meeting will be published on October 18 and the next meeting is scheduled on December 6-7. The next MPC resolution will be announced on December 7.
The central bank has also announced various developmental and regulatory policy measures. Deputy governor N S Vishwanathan stated that the modifications of existing guidelines for financial institutions will be issued by end of October this year. On the other hand, Deputy governor SS Mundra stressed on cyber security.
He stated that RBI was inspecting banks differently on cyber security last year and “going forward RBI plans to cover each bank from the view point of separate IP risk and cyber security risk.” RBI has announced that it will finalise the operating guidelines for small finance banks and payment banks during this week.
