Shaktikanta Das: RBI has zero tolerance for volatile, bumpy moves in rupee | India Business News – Times of India

MUMBAI: RBI governor Shaktikanta Das said on Friday that the central bank has zero tolerance for volatile and bumpy movements in the forex market and it would ensure that rupee is in line with fundamentals.
The governor also hinted at a rate hike, stating that without RBI’s adjustment of policy rates, negative real rates will increase and it will be a big disincentive for financial savings, which will have an impact on the investment outlook of the country. The governor was speaking at Bank of Baroda’s annual banking conclave in Mumbai on Friday.
“The RBI has been supplying dollars to the market to ensure adequate forex liquidity. After all, this is the very purpose for which we accumulated reserves when the capital inflows were strong. And, may I add, you buy an umbrella to use it when it rains!”

Das also said that there was no concern with regard to maturing external commercial borrowings as a predominant portion was effectively hedged.
The governor said that while the global situation remains grim amid fluid geopolitical affairs, the war and pandemic are adding to the forces of disintegration and fragmentation of the global economy.
“In such an environment, the Indian economy remains relatively better placed, drawing strength from its macroeconomic fundamentals. The financial system is well-capitalised, asset quality indicators have improved, balance sheets are stronger, and banks have returned to profitability. We are also seeing healthy pickup in credit demand,” said Das. On bank credit, Das said that while the latest published data is around 13. 5%, internally, the central bank was aware that year-on-year growth had crossed 14%. He said that an increase in credit offtake and RBI intervention in the foreign exchange market would drain liquidity, further prompting banks to increase their deposit rates.
Despite the challenges of inflation, Das said that the current monetary policy framework is best for the country. “The framework has worked well before the pandemic, during the pandemic, and even now, we are very much in line with the requirements of time in terms of the steps that need to be taken,” said Das. He added that the framework needs to continue. “This is the opinion of all of us in the RBI. Let’s not shift goalposts to just suit our convenience because the larger requirement of the economy and the financial sector is to have such a framework”.