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Taking stock: 20 things that happened at RBI under Shaktikanta Das's watch

BS Web Team/New Delhi 11 Jan 19 | 07:56 AM

RBI Governor Shaktikanta Das at the press conference in Mumbai | Photo: Kamlesh Pednekar

Shaktikanta Das completes one month as governor of the Reserve Bank of India (RBI) on Friday, taking charge after the shock resignation of his predecessor, Urjit Patel. 

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Das, when he was the economic affairs secretary, helped steer the demonetisation drive in 2016. His appointment came after months of acrimony between the government and the RBI over lending curbs and how to deploy the central bank’s surplus reserves.

As Das completes his first month in office, here are some major statements and policy decisions by the RBI:

Das debuts, promises to work with govt

Das took charge as the 25th Governor of the RBI on December 12, 2018, and promised to take all stakeholders, including the government, along on key policy issues to maintain growth while keeping inflation under check. 

Das meets heads of Mumbai-based public sector banks

On December 13, 2018, Das held discussions with chiefs of Mumbai-based public sector banks (PSBs), who wanted rules for recognising bad loans to be eased. They discussed liquidity in the system, credit growth, financial support to micro, small and medium enterprises (MSMEs), and the state of finance companies. 

Das chairs his first RBI board meeting

Das chaired his first RBI board meeting on December 14, 2018, discussing issues ranging from governance at the central bank to liquidity in the financial system.

Das buys more time on govt demand

On December 14, 2018, the RBI's board bought more time to review the government's demand for a greater say in the central bank's functioning -- one of the issues that had fostered hostilities between the two sides. "The board deliberated on the governance framework of the Reserve Bank and it was decided that the matter required further examination," the central bank said in a statement after the meeting in Mumbai. 

RBI announces bond buyback

On December 18, 2018, the RBI announced a bond buyback programme for the current financial year to address the liquidity deficit. In a notification on its website, the central bank said it would be injecting Rs 50,000 crore of liquidity in December through its open market operations, in which it buys bonds from the secondary market, against Rs 40,000 crore planned earlier.

In addition, it would buy another Rs 50,000 crore of bonds in January through five auctions of Rs 10,000 crore each. The central bank said it would "consider a similar quantum of OMO purchases until the end of March 2019".

Das meets more public sector banks

On December 19, 2018, Das met more state-run bankers to discuss issues related to relaxing the prompt corrective action (PCA) framework, liquidity and credit flows to MSMEs. This was the second meeting between public sector lenders and the RBI since Das took charge, following the sudden resignation of Urjit Patel due to deep differences with the government on a host of issues. 

"Meetings with public sector banks completed. Shall meet representatives of private sector banks and cooperative banks next week," Das said in a tweet on the same day. 

 

Bimal Jalant

Bimal Jalan to head of panel on size of reserves

On December 26, 2018, the RBI named former governor Bimal Jalan as the head of a six-member committee that will decide on the appropriate size of reserves that the central bank should maintain and the dividend it should give to the government. Former economic affairs secretary Rakesh Mohan will be the vice chairman.

Das meets private sector bankers

On December 27, 2018, Das held meetings with top private sector lenders and discussed liquidity issues and the flow of credit to small and medium businesses. This was the third meeting Das had with lenders, with the first two being with public sector banks, after he took charge on December 12.  

RBI faults haste in easing norms

On December 28, 2018, in its first report -- "Trend and Progress of Banking in India 2017-18" -- under Das, the RBI rebuffed demands for easing regulatory norms for banks and warned that any haste in relaxing rules for capital adequacy and risk weights when defaults were high and provisions low was harmful for the economy. 

Banking system getting back to health: RBI report

The bi-annual financial stability report (FSR) for December, published by the RBI on December 31, 2018, said that the bad assets problem of the banking sector in the country was receding for the first time since 2015. However, the non-performing assets (NPAs) were still too high for comfort, it added.  

RBI allows one-time restructuring of small biz loans

On January 1, 2019, the RBI introduced a one-time restructuring scheme for MSMEs with a maximum exposure of Rs 25 crore. The restructuring has to be implemented by March 31, 2020. Banks have to incur an additional provision of five per cent for these restructured accounts, the RBI said in a notification on its website.

RBI sets up committee on MSMEs

On January 2, 2019, the RBI set up an expert committee to propose long-term solutions for the economic and financial sustainability of the MSME sector, which is currently plagued by liquidity and other issues. An RBI statement said that the committee would be headed by former Securities and Exchange Board (Sebi) chairman U K Sinha. 

RBI will not allow 'loose money' situation: Das

The RBI would not like the banking system to be in a situation of "loose money", Das said on January 7, 2019, after a meeting with representatives of small- and medium-sized businesses. The RBI was also looking at new governance reforms for state-owned banks but would not "throttle" their functioning, Das told reporters.

No liquidity shortage at the moment: Das

On January 7, 2019, Das said the RBI would take steps if there was a shortage of liquidity in the economy though the current cash needs were largely met. "We do believe that the liquidity requirement of the economy and financial institutions to a great extent are met," he said. 

RBI likely to pay bumper interim dividend to govt: Report

The RBI is likely to transfer an interim dividend of Rs 30,000-40,000 crore ($4.32 billion-$5.8 billion) to the government by March, news agency Reuters reported on January 7, 2019, while citing three sources with direct knowledge of the matter. The amount would be three or four times the amount paid last year and would help the government meet its fiscal deficit target.

Bad loans level of banks on the decline: Das

On January 7, 2019, Das expressed satisfaction over the performance of the banking sector, saying that bad loans have declined, particularly of state-owned banks.

Loan waivers bad for credit behaviour of borrowers: Das

On January 7, 2019, Das emphasised that loan write-off decisions must take into consideration the fiscal health of the state government concerned and said that generalised loan waivers adversely affect the country's credit culture and the credit behaviour of the borrowers.

Need to reform banking sector without throttling it: Das

On January 7, 2019, Das said the regulator would continue reforming the banking sector but would not impose restrictions that might throttle the functioning of banks. 

Liquidity infusion will not be 'easy money': Das

On January 7, 2019, Das said that dealing with issues of liquidity was one of the central bank's biggest priorities but any infusion would be strictly based on the need to ensure that it was not seen as "easy money" by the markets.

Das meets shadow bankers

On January 9, 2019, representatives of non-banking finance companies (NBFCs) met Das and flagged the issue of banks increasing interest rates on loans to shadow bankers who are in need of funds. The NBFCs also sought a revision in rules to access funds from MUDRA, a refinancing agency that is a subsidiary of SIDBI. They also sought a structured arrangement for interactions with the RBI. 

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