Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday warned that cutting interest rates at this level would be “premature” and “very risky” due to persistently high retail inflation. He said future monetary policy decisions will be driven by upcoming data and inflation outlook.
Speaking at the India Credit Forum organized by Bloomberg, Das highlighted that inflation still remains high. “Inflation was at a high level in September, and is expected to remain high before easing in the next print,” he said, stressing that it would not be wise to cut rates now. “When inflation is around 5.5 percent and is expected to remain high, it would be very risky to cut rates,” he said.
Earlier this month, the RBI kept the key repo rate unchanged citing inflation concerns, even as it made its monetary policy stance neutral. The central bank’s next bi-monthly monetary policy review is scheduled for December 6.
Governor Das avoided giving any indication regarding future interest rate cuts and reiterated that the decision will depend on “incoming data and overall outlook”. Das also commented on the regulatory role of the RBI, clarifying that the central bank does not act like a “policeman” but keeps a close watch on the financial markets.
His comments come after the RBI took action against Sachin Bansal’s Navi Finserv and three other non-banking financial companies (NBFCs), directing them to stop loan disbursement from October 21 due to supervisory concerns. “We are not policemen, but we are keeping a close watch. When necessary, we take action,” Das said. He underlined the central bank’s commitment to ensuring stability in the credit markets.
