 "I can't spoil the fun press is having on my second term: RBI's Rajan | Top quotes")
The Reserve Bank of India on Tuesday kept key rates unchanged in its second bi-monthly monetary policy meeting. The central bank kept repo rate unchanged at 6.5%, while the cash reserve ratio was also unchanged at 4%.
Elaborating on the speculations surrounding his second term, he said, “In all such cases, a decision is reached after discussions between the government and the incumbent. It would be cruel of me to spoil the fun press is having,” he said as the participants in the press conference burst into laughter.
Here are top highlights from the Governor’s post-policy press conference.
On second term
It would be cruel of me to spoil the fun that the press is having on my extension.
In all such cases, a decision is reached after discussions between the government and the incumbent.
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Inflation target
Target (of inflation) is 5% by March 2017. We will have to figure out ways to attain this target.
Data on inflation has surprised on the upside. Inflation was higher than expected. We have to see how it pans out.
I hate these bird analogies, hawkish or dovish. It is a realistic assessment of data that has come in.
Cleaning up of balance sheets
We are working with the government and Sebi with respect to banks’ balance sheet clean-up.
We are looking at cleaning up of balance sheets of banks so that they can fund growth.
Policy stance
We have not shifted stance to neutral or tightening. We are looking for room to ease. If that room opens up, then we will look to ease.
Turmoil due to Brexit
I don’t think you can rule out Brexit as a source of volatility. There will be a lot of turmoil in financial markets. We cannot rule that out.
We have three defences — good policy, longer term liabilities, and reasonable amount of reserves. All of this will help us weather any volatility that emerges.
Stressed asset funds
We are not setting up stressed asset fund. We have been asked about the structure. We have given our views. It is up to the government and investors to come along with banks to set up such funds.
Review of MCLR
We need to assess what are the assets that are working. In general, there is a paucity of credit demand from the usual sources. This is why banks are not in a great hurry to reduce rates.
While credit growth has not been strong, deposit growth has been strong in two months. This would make banks look at deposit growth rather than investing in government securities.
Payments Bank
We are not overly perturbed that some of them decided to back out. It suggests licensing has been liberal.
Rupee liquidity
We will always provide what the market requires when it comes to rupee liquidity
Credit flows
Timely capital infusion in public sector banks will aid credit flows.
RBI Deputy Governor also elaborated on the impact of oil prices.
Oil Prices
Price between $40 and $50 is a sweet spot. We can absorb that. It is not a cause for worry right now.