Listen when RBI warns about something: Governor Das
The RBI governor was unusual in his outspokenness, finally relieved that he could physically address the audience for the first time since the pandemic. He concluded with his keynote address at the annual SBI Banking & Economics Conclave, which was addressed to a hall full of senior bankers and those from the Indian corporate sector. Dinesh Khara, chairman of the country’s largest lender State Bank of India and host of the event, was conducting a Q&A session with the governor.
In his speech, the RBI governor had cautioned some bankers, especially private ones, saying that the RBI was closely watching banks run only for profit motive.
The governor was asked about his views on the Standing Committee on Cryptocurrencies, and whether it would be right to treat such private currencies as an asset class if a bill is approved in the winter session of Parliament. .
The governor was not aware of the standing committee discussions, but he was unusually strong for a mild-mannered former bureaucrat who is on his way to become one of the longest-serving RBI governors on record.
“When the central bank, which is entrusted with maintaining the country’s macroeconomic and financial stability, says after detailed internal deliberations that we have serious concerns (about cryptocurrency)… Das said.
“I haven’t seen any such serious, well-informed discussion yet,” he said, adding that talks on the issues have mostly centered around the fact that this is a new technology and that the central bank has to accept or regulate it. should do.
Reiterating his warnings on the issue once again, the governor said that blockchain technology is a decade old, and it is here to stay and grow, but cryptocurrencies, which develop around blockchain, are an entirely different matter. Huh.
The RBI governor also stuck to his earlier claim that the number of users logged into the cryptocurrency platform is “highly exaggerated”.
Accounts are being opened for investments of Rs 1,000 to Rs 2,000, and even for Rs 500. In addition, the central bank has received feedback that credit is being provided to open accounts and increase the number. These small value investors make up 70-80 per cent of the investor base of these platforms. But he also acknowledged that the value of investing in cryptocurrencies has increased in the country.
SBI Chairman Khara commented that the easy liquidity has led many to misvalue their loans, though deliberately, to inflate their books. In his layered question to the Governor, Khara asked whether there would be a similar liquidity support for banks and corporate entities, if needed, as the Variable Reverse Repo Rate (VRRR), the lower end of the policy rate corridor, moves towards the repo rate. Is. The upper end of the corridor is being taken by the market as a clear sign of rate and liquidity normalization.
RBI Governor replied that whether the loan is wrong or not, it is the business decision of the banks.
“As we have told the bank CEO a fortnight ago, the mere fact that there is excessive liquidity, there should not be any mispricement of loans as this widespread liquidity is not a permanent feature,” Das said.
The introduction of liquidity infusion, when it took place last year, was needed to contain the slowdown in the mutual fund industry, the RBI governor said, while assuring adequate liquidity support if needed. Now, RBI is rebalancing liquidity.
“Let me make it very clear. There will always be enough liquidity to meet the needs of the productive sectors of the economy, but gradually, we want to rebalance the economy in such a way that banks are left with as much liquidity as they need. No more,” said the RBI governor.
The RBI governor, in his conversation with the SBI chairman, further clarified that the central bank would not want to interfere in the commercial decisions of banks, but a closer “real-time supervision”, which the RBI now follows, would mean that the central bank would The commercial decision making will also consider the business model of the banks.
“We will not intervene, but we will see what kind of vulnerability there is, or what kind of risks are being created in the bank, and our first priority will be to alert the banks themselves,” the governor said.
The government’s bank privatization plan is well underway, but the role of the RBI is limited to approving the right promoters using appropriate and appropriate norms of the central bank. The central bank will also play a role in amending the Bank Nationalization Act to facilitate privatization.
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