An owl is traditionally a symbol of wisdom, so we are neither doves nor hawks but owls, and we are vigilant when others are resting.
— Urjit Patel
The best way that a central bank can support growth on a durable basis is to ensure inflation is low, stable - there is financial stability - and that is the role that the central bank plays.
The materialisation of reforms in the form of rollout of the GST, the institution of Indian Insolvency and Bankruptcy Code, and the abolition of the Foreign Investment Promotion Board should boost investor and investment confidence.
As many have pointed out, it is not clear that we need so many public sector banks. The system could be better off if they are consolidated into fewer but healthier banks.
Remonetisation has happened at a fast pace, and that was part of the plan that, subsequent to the withdrawal of the specified bank notes, our production plans and supply processes would ensure that the remonetisation happened as quickly as possible.
Enhanced transparency has helped to reinforce the stability of India's financial system.
The staff members of all banks have worked very hard, and we all owe them our gratitude.
There are tens of thousands of bank branches and 4,000 currency chests. We need to be careful and try that this is a number which is not a mere estimate but a verified number both physically and in the accounting sense.
I think that it is important that one grows a thick skin fast in this business, and I think we have done that.
I think that is a very important milestone in our economic history that the monetary policy is now determined through a committee process where there are both independent committee members and representation from the RBI.
Growth is always there in the MPC's scheme of things; we don't lose sight of that, but not at the cost of inflation.
Government should eschew suasion and directives to banks on interest rates that run counter to monetary policy actions.
Monetary policy transmission encompasses the whole continuum of interest rates; of course, the central bank only determines the overnight policy rate.
From the RBI side, the fake Indian currency note is an important issue that needed to be addressed. The other collateral benefits from this, in terms of greater accountability, better public finance, more transparency, are, by definition, areas that take time to fully play out.
There are some things that are under our control, and that is to ensure that we ourselves follow sound macroeconomic stability rules.
It is important to recognise near- and medium-term risks to the inflation outlook.
Divestment measures would improve overall banking sector health.
The monetary policy committee could either keep rates constant, increase them, or bring them down. There are three options possible compared to when it is accommodative.
Valid criticism is something that we are open for, and we take it in the spirit in which it is given and try to improve ourselves.
This is a once in a lifetime event. It is very rare to remove 86% of the currency in circulation in one go. The logistics of such an operation are mammoth.
The RBI is interacting with the banks every day.
It is easy and quick to fritter away gains regarding macroeconomic stability.
If very fundamental reforms take place, especially when it comes to factors of production like land, labour, then a higher growth rate is possible.
What is important is that in a capital-scarce country like India, the real interest rate needs to be positive enough to encourage healthy growth of financial savings; we get into macro difficulties when real rates on financial savings become negative for a length of time.
The two important variables for the policy formulation are projected inflation and the output gap. There is no clear hidebound mathematics that we must give 'X' weight to inflation and 'Y' weight to growth and form the associated policy.
We should redefine the metric for effective lending, viz., prioritise loans to enterprises, which will generate more employment.
The lack of a consistent policy from major economies is the main source of volatility.
Very few countries grow at high rate if inflation is high and volatile. I think, in a way, we are doing our bit to support a higher growth rate, but on a durable basis.
If one sees far, structural changes that come with temporary disruptions can be growth- and efficiency-augmenting in the medium to long term.
One of the things that the public sector banks need to do is to raise private capital from the market and not rely on government largesse.
I think it is important that we should be on the side of keeping borders open with respect to trade and movement of factors of production.
There is little room for complacency, and it is important to guard against sporadic volatility in financial markets.
People have asked why the new currency introduced was different in size and thickness from the old. This is because the new currency has been designed to make it hard to counterfeit. When you are going to make a change of this magnitude, you need to get the best standards in place.
People were holding high denomination notes to keep tax unaccounted for money. Some sectors like real estate were using cash to avoid tax.
Large credit guarantees also impede optimal allocation of financial resources and increase moral hazard.
We have been mandated by the government, backed by legislation, that we have to have an inflation target of about 4%.
There will always be divergence of views on the output gap, as it is unobservable in a rigorous direct sense. There are only estimates. How can there be a strong consensus on that?
Yes, 4% is the government-mandated target to the MPC. The plus/minus 2 percentage-point upper and lower bands are the tolerance levels specified by the government. If we breach those for three consecutive quarters, we need to inform the government of why that happened and what we propose to do to bring inflation within the two bands.
A well-functioning transmission should at some point go from the overnight right up to 40 years, and that is the ultimate objective in having monetary transmission that affects the whole gamut of borrowing tenure.
I think India's policy that the openness of trade should be carried through a multilateral process is the right one.
