RBI sticks to 10.5% growth forecast

- Governor declined to comment on the inflation trajectory privatisation of PSBs in process

- RBI never used any alphabet to denote the recovery

New Delhi: Showing confidence on economic recovery in India, Reserve Bank of India (RBI) Governor Shaktikanta Das said that the growth projection of 10.5 per cent for the next financial year (2021-22) would not have to be revised given the strong economic recovery of the country.

Speaking at the India Economic Conclave, Das said that now the world knows the dangers of the Covid-19 pandemic and it is not as in the case of 2020 when there was complete uncertainty.

"The revival of economic activity which has happened, should continue unabated going forward. My understanding and our preliminary analysis show that the growth rate in next year, which is at 10.5 per cent which we had given could not require, I repeat, would not require a downward revision," he said.

On the recent frenzy bond market and the surge in the bond yields globally, the Governor cautioned that disorderly yield curve evolution will act as an impediment for growth and will undermine the process of economic recovery, not just in India but globally.

Regarding the proposed privatisation of state-run banks, Das said that the central bank is discussing the privatisation of public sector banks with the centre, adding that the process will move on. He said that a healthy banking sector, with a strong capital base and ethics-driven governance remained a policy priority.

The governor affirmed the central bank's commitment to use all its policy tools to facilitate the economic revival from the debilitating impact of the pandemic while ensuring price and financial stability. It can be noted that after deep rate cuts initially, the RBI has been focusing on a slew of measures uncharacteristic policy measures to help the economic revival as inflation - its primary objective - became into a point of concern. Das declined to comment on the inflation trajectory he sees going ahead, asking everybody to wait for the resolution of the Monetary Policy Committee early next month which will have the RBI's outlook.

Bond market row

When asked about the bond market, Das said the central bank and the market are in no fight and added that the relationship should be non-combative. He, however, added that the RBI would like for an orderly evolution of the yields curve and no sudden spikes. The RBI does not want excessive volatilities in the forex market and has been accumulating reserves to protect against the possible impact of the withdrawal of the stimulus measures in advanced economies, Das said. At present, India's forex reserves are sufficient to cover for 18 months of imports but there is no level of the reserves which the RBI is tracking, Das said, committing to keep the rupee stable.

Awaiting decision on Cryptocurrencies

The Reserve Bank has 'major concerns' on the cryptocurrencies traded in the market and has conveyed the same to the government, said Das. Underlining that both the government and the RBI are committed to financial stability, Das said there are no differences between the central bank and the Finance Ministry on the matter, and we should now await the final decision on the matter from the Centre.

Making banks competitive

The Reserve Bank foresees a "competitive, efficient and heterogeneous" banking sector with four distinct sets of banks dominating the landscape over the next decade, Das said.

There will be large banks having presence across the country and the world, mid-size banks present across the economy, small finance banks/regional rural banks/cooperatives to take care of the small borrowers and digital players, he said. The comments come days after the RBI appointed a panel headed by former Deputy Governor Shyamala Gopinath on bank licences to evaluate applications for universal banks and small finance banks. An internal Panel had recently recommended allowing deep-pocketed corporates into the banking fray, something the RBI had been averse to for long. A final view on the controversial proposal is yet to be taken.