India cenbank chief says RBI aims to bring down liquidity to adequate levels from excess

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FILE PHOTO: A worker walks past the logo of Reserve Bank of India inside its office in New Delhi
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By Swati Bhat

MUMBAI (Reuters) - India's central bank wants to gradually lower excess liquidity in the banking system but will ensure there is adequate liquidity always available to meet the needs of the productive sectors of the economy, its governor said on Tuesday.

Reserve Bank of India governor Shaktikanta Das was speaking at the State Bank of India's Banking and Economics Conclave.

"Our effort is to ensure that, that much liquidity is available to the system, which the system requires. There will always be adequate liquidity to meet the requirements of the productive sectors of the economy," Das said.

"But slowly we want to re-balance the economy in a manner that banks are left with that much liquidity which they need and not excess," he added.

SBI chairman Dinesh Khara said at the conclave there were concerns about banks having gone overboard and mis-priced risks when sanctioning loans due to excessive availability of rupee liquidity in the banking system.

Das defended the RBI's stance on retaining the surplus liquidity, saying it was necessary after the pandemic hit the nation but said the RBI was now slowly looking to re-balance the liquidity.

He said irrespective of the level of liquidity in the banking system, risk pricing of various loans being extended by the banks must be done very diligently by the banks themselves, "because this excessive liquidity is not going to be a permanent feature."

DIGITAL CURRENCY CONCERNS

Separately, when asked about a recent meeting held by the prime minister with regard to the future of cryptocurrencies and the bill likely to come up in the winter session of Parliament, Das reiterated his concerns over macro-economic and financial risks.

Das said despite the value of transactions and trading in cyrptocurrencies having gone up in recent months, the number of accounts being marketed is exaggerated, as 70%-80% of these accounts are doing very low value transactions.

"When the Reserve Bank of India as the central bank of the country ... says there are very serious concerns about macro-economic and financial stability, it means there is a need for much deeper discussions," Das said.

"I am yet to see serious, well-informed discussion in the public space on these issues. This blockchain technology is more than 10 years old and the technology can grow and will grow without cryptocurrencies," he added.

(Reporting by Swati Bhat; Editing by Steve Orlofsky)

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