An IWG taking a look at central bank digital currency: Das, Kanungo & Patra

In the post-policy press meet, Governor Shaktikanta Das, and Deputy Governors Michael Debabrata Patra and B P Kanungo spoke on a range of topics like the retail direct scheme, need for asset quality review (AQR) of banks as indicated in the Economic Survey, and developments on a central bank digital currency. Edited Excerpts:

On forward guidance of accommodative stance…

Das: The market has its own way of interpreting things. We have said we will continue with accommodative stance into the next year. We will take a call, but we have not specified June as the date by which the forward guidance will end. If you see, overall liquidity remains the same.

On allowing retail investors to open gilt accounts with RBI…

Das: This is a major structural reform because world over very few countries have done this, apart from the USA and Brazil. We are the first to do it in Asia.

Kanungo: For many years we have been trying to broad base the G-Sec market and with the size of government borrowing, it is absolutely necessary that the investor base is broadened. So far, retail investors could access the NDS-OM (negotiated dealing system-order matching) through an aggregation model — stock exchanges were allowed to aggregate the demand and place it with RBI in the NDS-OM. Going forward, we thought we should move beyond this so that retail investors can place a direct bid in the NDS-OM system. Also, retail investors can open a gilt account with RBI in the e-Kuber system. An internal working group (IWG) is looking at the digital currency model.

ALSO READ: Monetary policy: RBI doing exactly what AQR does, though unofficially

On the impact of retail direct scheme on deposit mobilisation by banks…

Das: As the gross domestic product and size of the economy grows, the total volume of savings and deposits will naturally expand. So, we feel that it will not undermine the flow of deposits to banks or mutual funds. It is one more avenue that has been made available. In any case, small savings offer much higher rates than bank deposits. Notwithstanding that, bank deposits this year have grown by 11.3 per cent. The size of the pie is too large to support all.

On forward premia rates…

Patra: Our first objective is to protect our domestic markets from high global spillovers. And, there is very high surge of capital inflow and not only that, there is a hunt for yield. Our markets will remain domestically oriented. To that extent, there are premium spikes and we are watchful of them, but through our market operations we will ensure orderly conditions in all sections of the market.

On whether growth is being driven by fresh consumer demand or pent-up demand…

Das: We have been tracking some high-speed indicators and the list that we monitor is long. In almost all segments we are seeing a growth of demand. Therefore, demand has now moved beyond pent-up demand to actual demand.

On the need for a second AQR…

Das: In the last two years, we have deepened our supervision. In the context of non-banking financial companies, I had said two years ago, our supervisory team is doing a deep dive to get a sense of the true state of affairs with regard to NPAs.

Similarly, when it comes to banks, we are making our own assessment of the true state of NPAs in each bank. So, we have a sense of the overall situation. We are doing exactly what an AQR needs to do.

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