RBI Governor Shaktikanta Das
– Photo: amarujala.com
Expansion
RBI Governor Shaktikanta Das made it clear that there are no plans to allow business houses to open banks. Giving approval will increase the risk associated with conflict of interest and related party transactions. Das said at an event on Friday, running a bank is different from other businesses. Experiences around the world show that it will be very difficult to monitor or regulate and prevent related party transactions. The risks involved are very high. RBI had disqualified several large business groups from being granted licenses for new banks a decade ago. However, an RBI working group started a fresh discussion on the issue in 2020.
The country does not need more banks
Referring to the period before nationalisation of banks in the late 1960s, the governor said, at that time in India too, business houses were involved in banking activities. However, now we do not need more banks to fulfil aspirations but resources to grow the economy.
- Das said, India needs strong and well-run banks. We believe that with the help of technology, they will be able to mobilize savings and meet loan needs across the country.
Economic growth is strong, emphasis is on controlling inflation
Das said, the growth rate is good in the current environment. Monetary policy should clearly focus on controlling inflation. Amid the debate over neutral rates, he said, theoretical and abstract concepts are based on a person’s decision. These cannot determine policy in the real world.
- On the impact of higher interest rates on growth, the Governor said, “Despite the current policy rate, growth has remained strong. We will achieve the target of 7.2 per cent growth rate in 2024-25.”
- The central bank is paying special attention to the inflation front of food items. Wholesale price index based inflation is also being monitored.
Rapid improvement in the economy in coordination with the government
Das said that during his six-year tenure, the relationship between the government and the RBI has been good. Due to this, the economy has improved rapidly after Covid-19. On the allegations made in the book written by his predecessor, he said, no one expects the RBI to become a ‘cheerleader’. I have no such experience. Das’s tenure ends in December this year.