MUMBAI: THE Indian economy needs a push not only from the Monetary Policy Committee (MPC) but also from quicker transmission of rate cuts effected by the RBI, the central bank’s Governor Shaktikanta Das said on Monday. The time has now come to formalise the linking of lending rates on new loans to external benchmarks, Das said speaking at FICCI’s Annual Global Banking Conference, adding that this should lead to new loans getting cheaper and more transparency.
“We had kept it in abeyance. We wanted to see how the market evolves and plays out. It is a positive trend that the banks have responded,” Das said, moving away from his scripted speech. RBI had announced in December that banks would move towards external benchmarking for loans by April 2019, but the move was put on hold since the central bank wanted to hold more consultations with banks.
Das noted how after the last monetary policy announcements many banks had immediately announced interest rate cuts, with some moving to link loan products to Repo rate. “Our expectation is that they should move faster,” he said.
The MPC resolution had specifically mentioned that at this particular juncture, growth is a matter of highest priority, Das pointed out. Though he dwelt at length on financial stability, global headwinds etc., the digression from the written speech was clearly an indication of the urgency to pass on rate cuts to stimulate growth.
Interestingly, Das also brought in omnipresence of gloom. “I don’t say maintain a Panglossian countenance. But, very important in any real economy: sentiment, real mood is important,” he pointed out. Dr Pangloss, a character from Voltaire’s satirical novel ‘Candide’, is a symbol of excessive optimism even while facing adversity. “Capitalise on the opportunities. Mood of doom and gloom is not going to help anyone,” Das said. However, data suggest things are tougher than talked about, said Amitabh Chaudhury, MD & CEO of Axis Bank speaking in a panel later, with banks having to balance growth opportunities, regulations and being cautious.
Das also reiterated that no large, systemically important NBFC would be allowed to collapse. “...we do not want a repeat situation or a collapse of another major systemically important NBFC. It is our endeavour to ensure that there is no collapse of a large or a systemically important NBFC,” Das assured.