Interest rates: Expect RBI, MPC to factor in inflation levels, says Jaitley

Updated - January 16, 2018 at 02:32 PM.

'Need to trust RBI's judgment and wait for its decision'

rbi

Amidst the industry clamour for a further policy rate cut in a softening inflation rate environment, Finance Minister Arun Jaitley on Friday put the ball squarely in the Reserve Bank of India's court, stating that one should wait for the central bank's decision on this matter.

He expressed hope that the RBI and the to-be-formed Monetary Policy Committee (MPC) will in the upcoming review "collectively" factor in recent developments on the inflation front and take a pragmatic decision. Jaitley indicated that the MPC is expected to be in place before the monetary policy review in October.

"We must appreciate that RBI is a responsible institution We should not only wait for its decision but also trust it for taking an appropriate one," Jaitley told presspersons after his meeting with chief executives of public sector banks in the Capital.

He was responding to a query on whether a situation has arisen to further cut policy rates given that the consumer price index (CPI) inflation has somewhat softened to the 5 per cent level.

NPA CHALLENGE

Jaitley said banks are still faced with a challenge on the high non-performing assets (NPA) front.

“A detailed discussion was undertaken on this matter at today’s meeting. Both the RBI circulars and the schemes under these circulars, legislative changes in DRT and SARFAESI laws have empowered the banks to take effective steps. The banks will now have to take the initiatives,” Jaitley said.

At today’s meeting, banks conveyed to the Finance Minister that they were finding it difficult to find alternate promoters and buyers, even as they were taking efforts on this front.

To a question on whether NPAs in the banking system had peaked, Jaitley said the NPA situation had arisen due to large provisioning that has been done and the moment there is a revival, a lot of provisioning will be reversed and accounts will get upgraded.

“I think the current phase where we have reached atleast tells us where the problem is, tells us the magnitude of the problem. It does not put anything under the carpet. It gets us in a position of readiness to brace up for the challenge itself,” Jaitley said.

STEEL, INFRASTRUCTURE

Jaitley said the bankers today conveyed to him that they see the steel sector staging a revival of sorts in the coming days.

“The silver lining is that two principle sectors (steel and infrastructure) that are contributing to it (the NPA situation)… both thanks to the proactive steps taken with regard to these sectors, would at some stage start seeing a reversal”.

JAN DHAN CONTROVERSY

On recent controversy around bankers’ resorting to malpractices to reduce the number of zero-balance accounts under the Pradhan Mantri Jan Dhan Yojana (PMJDY), Jaitley said that banks are investigating on this issue.

He was responding to a question on recent media report alleging that bankers in some branches of Punjab and Sind Bank, Punjab National Bank, Bank of Baroda and Bank of India have themselves deposited Re 1 in the Jan Dhan accounts to reduce the number of zero-balance accounts.

“In case of a few accounts, this issue has arisen and there are names of four banks. We have asked them. The banks are investigating from their branches whether account holders have put in money or business correspondents have done it. After that the banks will give their report to the Department of Financial Services,” Jaitley said.

Jaitley noted that there are 24 crore Jan Dhan accounts and as much as Rs 42,000 crore have been deposited in banks to operate these accounts.

“You don’t get Rs 42,000 crore by just collecting Re 1 deposits. Of course, there are some accounts that have zero balances. Banks are verifying details of those accounts where such small deposits of Re 1 were made”

CYBER SECURITY

Jaitley also said that an external expert on cyber security had made a presentation on cyber-security at today’s meeting.

“Banks are fully seized of the extent of the problem inherently connected with digital functioning”, Jaitley said.

MUDRA LOANS

Jaitley said that so far this fiscal as much as Rs 46,000 crore have been disbursed under the MUDRA loan scheme. In the remaining months, banks will take

efforts to scale this up to a targeted level of Rs 1,80,000 crore.

Last year, target of Rs 1,22,000 crore for MUDRA yojana was exceeded, he added.

srivats.kr@thehindu.co.in

Published on September 16, 2016 09:41