Urjit Patel said, ‘We have a neutral stance, which means that data flow in the coming months and quarters will determine what we do regarding the policy’
BS Reporter Last Updated at December 6, 2017 19:33 IST
If growth doesn’t pick up and inflationary pressures continue, what will you give more importance to going ahead?
The liquidity seems to be drying up and banks have already started raising bulk deposit rates. Will transmission of rates take place?
Patel: You should look at the existing rate of bulk deposits and where it has been increased to. And then it is more of qualitative assessment, rather than a quantitative. To the best of my knowledge, the wholesale deposit rate was very low in the first place. Secondly, I don’t know what you mean by ‘liquidity drying up’ because our weighted average call rate continues to be below the policy repo rate. So to me it is not at all clear, and we are still undertaking a fair bit of reverse repo operations. So liquidity drying up is just a wrong definition of what you are saying.
In a textbook operation, as soon as you inject liquidity you would actually sterilise it with an open market operation because otherwise you will lose control of your monetary policy. We have done it this time with a lag, because we were waiting for the liquidity conditions post demonetisation to normalise, and see whether currency in circulation stabilises.
How difficult is the task of seeding bank accounts with Aadhaar going to be? How are banks prepared?
N S Vishwanathan: We have said that initially the seeding should happen on a demographic basis as it can be done for a large number of people in one go. That we don’t see as a problem. Ultimately, they will have to do the biometric (registration); that will take some time.
You had mentioned about the bank recapitalisation plan as a ‘reform and recap’ package. When do you expect the next cycle of lending to kick-start?
Patel: You know the latest data on bank credit and adjusted bank credit, and total financial resources flows, suggest that we are already on the uptick in terms of the credit growth. So credit is already flowing in, more than what was the case in October and as the economy picks up, the demand for credit should go up and there is enough supply to ensure that lack of credit is not in the way of supporting higher growth. So the uptick in credit growth has already happened.
Banks have continued to report fairly material divergences in bad loan reporting for FY17, there is a bit of confusion on what exactly is going on. Is there another round of asset quality review (AQR) being looked at? In private conversations, bankers say the RBI is moving the goalposts and hence these divergences are coming. Can you please help us understand?
Michael Patra: They are going to seven (per cent) and 7.8 per cent, respectively, so we’re on an uptick from now.
First Published: Wed, December 06 2017. 19:28 IST