State Bank of India (SBI), the country’s largest commercial bank, does not expect the Reserve Bank of India (RBI) to go in for any rate cut at its upcoming Monetary Policy Committee (MPC) review meeting in August, its chairman Dinesh Khara said on Wednesday.

“As a bank, we don’t expect any interest rate cut. Status quo is something we expect,” Khara said at Financial Inclusion and Fintech Summit organised by Confederation of Indian Industry (CII) in the national capital.

He was responding to a query on whether SBI expects the RBI to begin cutting policy rates at the next MPC meeting slated for August 8-10.

Khara noted that the higher-than-expected rise in consumer price inflation (CPI) in June 2023 at 4.81 per cent could be perceived as only an “aberration”. The higher CPI level of 4.81 per cent was still below RBI’s upper tolerance limit of 6 per cent.

It maybe recalled that RBI had at both the previous MPC meetings in April 2023 and June 2023 kept the policy rates unchanged at 6.5 per cent. The repo rate had gone up by 250 basis points during Financial Year (FY) 2022-23.

PMJDY a ‘game changer’

In his address at the Summit, Khara, who is also chair of B20 Taskforce on Financial Inclusion for Economic Empowerment, highlighted that there has been a lot of emphasis on financial inclusion in the recent decade. 

Noting that the launch Prime Minister Jan Dhan Yojana (PMJDY) in 2014 has been a “game changer”, Khera said this had encouraged people to save, and such savings (₹2 trillion in 49 crore PMJDY accounts) are now being put to good use for the development of the economy. 

The ownership of these accounts also ensured seamless remittance of money to people during the times of pandemic, using this infrastructure. 

“This innovation has truly proved to be a game changer for an economy like India,” Khara said.

Khara also noted that PMJJBY, PMSBY and APY have now helped create a safety net for large sections of population. “In the last decade, the kind of investments done in this space is likely to yield results in the days to come,” he added.

The integration of financial inclusion with social protection measures have also resulted into a significant financial discipline, strengthened financial resilience across a significant population of the country.

Praise for UPI

Khara noted that the Unified Payments Interface (UPI), account aggregator for digital credit and ONDC for promoting e-commerce and Central Bank Digital Currency (CBDC) are the significant transformative initiatives taken in financial sector in last few years.

The increasing use of UPI has made the payments system a very efficient system in India, he added. 

The SBI chairman said that UPI is expected to be eventually the most important settlement mechanism across the globe and it will even make international remittance cheaper.

“Indian government is aiming to bring all the G20 countries on board to enable international UPI payments. This is going to be a remarkable step and will also probably lead to integration of G20 as a Group,” Khara said.

On CBDC

Khara also said that the scope of CBDC (digital rupee) can be further enlarged by including financial institutions such as mutual funds or insurance services, when they actively participate in settlements of government securities (G-sec) or State development loans. 

“It is a very valid case. CBDC will take away a part of the physical currency circulation, as well as bring efficiency in settlements,” Khara said.

At the same time, Khara made it clear that CBDC would not be substitute for physical currency and there is a scope and case for coexistence of both physical currency and digital currency, given the size of the country.

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