RBI Governor said, it would be premature and very risky to cut interest rates at this time.

By Sandy Verma On Oct 18, 2024

New DelhiNew Delhi: Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday said cutting interest rates at this level would be 'premature and very risky'. Speaking in a fireside chat at the India Credit Forum event in Mumbai reported by Bloomberg, Governor Das warned against prematurely cutting interest rates if inflation risks persist. RBI still estimates growth at 7.2 per cent for FY25 and inflation is expected to moderate by November. Das said, “We are not behind the curve. The Indian growth story remains intact. India is set to grow at 7.2 per cent. Growth is steady and resilient, inflation is coming down with some risks, so at this point “But a rate cut would be premature and very risky.” “There may be differences, but broad market expectations are perfectly aligned with our policies,” he said, responding to criticism that the RBI could lag in managing the economic outlook.

He discussed in detail India's overall economic resilience, highlighting the country's stable macroeconomic fundamentals and strong confidence of international investors. According to Das, these factors have helped maintain the stability of the Indian rupee, which has depreciated only marginally in response to global market movements. He assured that private loans pose global risks, but India's regulatory framework for non-banking financial companies (NBFCs) ensures stability. Das's comments come amid broader discussions about India's economic momentum, with the country recently overtaking China in population and maintaining a faster economic growth rate than its neighbour.

He stressed that India's growth story remains intact, even as the country deals with inflationary pressures and global economic challenges. Responding to the question on private lending, the RBI Governor further said that it is creating some risk for every central bank, but there is no threat to India. “As far as India is concerned, this is not a problem at the moment in the sense that private credit in the Indian context is mostly given by non-banking financial companies, which are regulated by the Reserve Bank,” he said. Reflecting on the contribution of RBI over the years, Das highlighted several key initiatives that have strengthened India's financial sector. Pointing to the proactive stance of RBI in regulating the banking sector, he said that RBI is keeping a close watch on the debt markets and takes action whenever necessary.

The Governor underlined the RBI's role in enhancing the stability of banks, narrowing the gap between credit and deposit growth and supporting the rapid growth of non-banking financial companies (NBFCs), which now account for about 30% of India's credit market. Are percentage share. Talking about KYC issues, Das said, “I think there have been some complaints about issues related to KYC, issues related to Know Your Customer and knowing the ultimate, beneficial ownership of investments. Now, it is not something like that. is what we have created, rather it is a requirement of FATF.” Given the complexities of global financial markets, KYC norms are essential to ensure that funds coming into India are from legitimate sources. “We often get representations about issues related to procedural issues, related to Know Your Customer. These are KYC related issues. And this is being addressed not only by us, but also by the securities markets regulator, especially For foreign portfolio investors, it has more to do with the securities market regulator, SEBI, which is dealing with it,” he said.
(ANI)