RBI Governor Shaktikanta Das emphasized on Friday that the Reserve Bank of India (RBI) must focus “clearly” and “unambiguously” on inflation, especially amid sustained economic growth. Speaking at the Financial Express Modern BFSI Summit, Das stated, “Our target is inflation, and we are supposed to keep growth in mind.”
“We monitor growth numbers very carefully,” said RBI Governor Shaktikanta Das. “The RBI Act mandates the central bank to maintain price stability, targeting 4 percent inflation, while considering growth objectives. Thus, growth is always a factor in our monetary policy decisions.” Das highlighted that India’s economic growth has been robust, averaging 8.3 percent over the last three years.
“This year, our projection is 7.2 percent, and we are optimistic about achieving it. We believe the April–June quarter growth was 7.4 percent, and Q2 growth momentum remains strong. Therefore, we must focus clearly and unambiguously on inflation,” said RBI Governor Shaktikanta Das.
The domestic rate-setting panel has kept the repo rate unchanged at 6.50 percent since February 2023 to achieve the 4 percent inflation target sustainably.
Commenting on the neutral rate of interest, Das noted, “Previously, the neutral rate was pegged at 0.8–1 percent post-pandemic when potential growth was low. Now, with Covid behind us and potential growth increased, the neutral rate is pegged at 1.4–1.9 percent. So, even if real rates seem high, they are not.”
Responding to a question about allowing business houses to enter banking, RBI Governor Shaktikanta Das stated, “India needs sound, healthy, and well-governed banks, not just more banks.” He explained that globally, when real sector companies enter banking, potential conflicts of interest and related party transactions arise, making it difficult to monitor and prevent such issues. “The risks involved are very high,” he added.
However, Das emphasized that the RBI is open to new applications for setting up universal banks. “I’m not suggesting that the current number of banks is sufficient and no more licenses will be granted. If applications are received, we will consider them,” he said.
Governor Shaktikanta Das acknowledged the challenge climate change poses to economic growth. He mentioned that the RBI is drafting strategies to address climate-related risks and provide climate financing. However, he cautioned against the risk of green-washing and stressed the need for vigilance in this area.
In response to a question, Das noted that the government has enjoyed a smooth relationship with the RBI during his nearly six-year term, attributing the swift economic recovery post-pandemic to close coordination between the two. “From my experience, nobody expects the RBI to be a cheerleader. I have had no such experience,” he added.