Governor’s interaction with audience after his 17th K P Hormis Commemorative Lecture on March 17, 2023 (Edited Excerpts) - आरबीआई - Reserve Bank of India
Governor’s interaction with audience after his 17th K P Hormis Commemorative Lecture on March 17, 2023 (Edited Excerpts)
Shri Shaktikanta Das, Governor, Reserve Bank of India
उद्बोधन दिया मार्च 20, 2023
Governor, Shri Shaktikanta Das delivered the 17th K P Hormis Commemorative Lecture on ‘G20 for a Better Global Economic Order during India’s Presidency’ at Kochi on March 17, 2023. After the lecture, the Governor interacted with the audience. The edited excerpts of the interaction are placed below. Moderator: Gayathri Suresh, FISAT Business School: Shaktikanta Das: The underlying behind this is a huge responsibility to ensure financial stability and monetary stability in the country, because only when you have financial stability and monetary stability in the country, then the value of the rupee remains where it is. So as I said, the signature is not a sign of power. It is a sign of responsibility. Gayathri Suresh: Suchitra Menon, Irish Linen: Shaktikanta Das: The Reserve Bank, as the issuer of the currency notes, naturally, had the responsibility of printing and supplying these notes to the market and the Reserve Bank did its job at that time admirably. In fact, there is nothing called demonetisation in the official lingo. It was the withdrawal of the legal tender character of those notes. So, that was an issue which the Reserve Bank had to deal with. From time to time, the Reserve Bank deals with various issues. We had COVID, which had its fallout, and the Reserve Bank had to deal with it. We had the war in Ukraine and its spillover and the fallout, which we had to deal with. So, in a country as complex as India, in a world that is so dynamic and fast-changing, the underlying theme of all Reserve Bank's policies, as I mentioned earlier, is always to ensure financial stability. When we are increasing interest rates or reducing interest rates, or we are taking any other measure, the overarching theme is to maintain financial stability. With regard to the growth, the Reserve Bank is at the forefront of ensuring greater financial inclusion, greater digital payments, making credit available to the last person in the queue. When we take our interest rate decisions and other decisions, we are always mindful of the growth aspects. So, it is a kind of all-encompassing function. Demonetisation, what you call as demonetisation, is one of the sorts of challenges which the Reserve Bank dealt with, as it had dealt with several challenges before that, and as it is continuing with several challenges after that, and as it will continue to deal with future challenges. I can assure you, the Reserve Bank will deal with it to the best of its capability, and our job is to ensure financial stability. We remain committed to that. Ravi Rajagopalan, Boson Systems: Shaktikanta Das: Our job is to keep on supervising and keep on highlighting the risks, highlighting the challenges which are emerging. We continuously do stress tests. We identify any potential buildup of risk in every institution, and we constantly engage with the management of the banks through our supervisors. As I mentioned in my speech that we monitor the root causes of vulnerabilities. We are now doing a much deeper dive into the business models of the banks which may not be sometimes to the liking of the banks. They may be feeling that we are interfering in their commercial operations. We are not. We do not tell them you do this, you do that. We don't tell them. We sensitise them that we have analysed your bank. We find that this problem is developing in your bank. Has this problem been considered by you? If it has not been considered, please examine this matter and take it to your Board. Let the Board take a decision. If a risk is building up, we sensitise the bank. The bank's Risk Management Committee is supposed to focus on that. We do not tell what the banks need to do because the banks know better what they have to do with their interest and the interest of their stability. Now so far as sharing experiences is concerned, we learn from each other. It is not as if we do not learn from others. We engage with several other banks, and we learn from each other in matters of regulation, supervision, etc. There is a constant sharing of information and we take this forward. We have the arrangement of the Financial Stability Board which again reports to the G20. India is a part of the Financial Stability Board also. Lot of deliberation goes on in this Financial Stability Board. We have the Bank for International Settlements (BIS), of which India is a member. Every two months at BIS, all the Governors meet and discuss the global situation. We discuss what is happening in each of the countries, and there is a lot of experience sharing. So, there is a constant sharing of information, which goes on. We do not have the full details of what exactly has happened in the US, we are assessing the situation from the outside but some trends are now emerging as to what is likely to have happened. I am sure the US authorities will deal with this issue and the US Fed and the Treasury have come out very strongly. They are dealing with the situation and they will deal with it. So far as India is concerned, the stress tests are done by the RBI on a continuous basis. Stress tests are done not only about the individual entities but also to the overall system like, what are the systemic stresses which are building up. We keep on doing these stress tests using various parameters. In several scenarios, like in a baseline case, severe stress situation and a very severe stress situation. We draw various parameters and do stress testing for each of these situations, what is likely to happen if these, these, these things deteriorate and accordingly advance action has to be taken proactively. So, the Reserve Bank is constantly engaged with all the banks and a lot of improvement has happened over the last few years. It is a continuous exercise. There is no room for complacency. We will continue our exercise. Moderator: Sreekanth, ESAF Small Finance Bank: Shaktikanta Das: Basically, as a regulator, it is our responsibility to ensure that the provision of finance is done in a sustainable manner. The risks arising out of climate change are properly understood and are factored into the lending practices of the banks and NBFCs. The banks also themselves must build, must be aware of the risks involved in every lending and provide adequate risk management or mitigation measures in all their actions, whether in individual loans or sectoral loans. So, we are taking this forward. We have just commenced our activities last year. We have become a member of what is called the NGFS, that is the Network of Central Banks and Supervisors for Greening the Financial System. So, we have become a member of that and we are now taking it forward. Going forward, we will have to focus on this and banks should be sensitive to the risks arising out of climate change and what impact it will have on their balance sheet accordingly, the banks need to take appropriate mitigation measures. Moderator: Shyam Srinivasan: |