Banking system sound, well capitalized and provisioned: RBI Gov
India has a six-sided buffer, including a favorable growth differential, lower inflation than many of its trading partners, a cushion of foreign exchange reserves and a strong banking system built around its economy. , which every participant in the financial markets should bear in mind, according to the Governor of the Reserve Bank of India, Shaktikanta Das.
Das pointed out that India is widely seen as one of the fastest growing major economies in the world in 2022, while other major economies could experience a recession or a considerable moderation in their growth momentum.
“India’s favorable growth differential gives investors confidence. This is amply reflected in the surge in portfolio inflows into India since July 2022. Inflows in August alone, at $7.5 billion, are more than 16 times net inflows in July,” he said. declared at the annual FIMMDA event.
“The terms of trade shock has eased”
The Governor observed that the recent decline in commodity prices and supply chain pressures have eased the terms of the trade shock that India has faced in the aftermath of the pandemic and war.
With the resulting easing of imported inflationary pressures, India’s CPI inflation peaked in April 2022, he said.
Additionally, India’s average August crude basket price of $97.4 per barrel came in lower than we had assumed for the full year at $105 per barrel in the August 5 monetary policy resolution. . In fact, India’s inflation is lower than many of its trading partners.
Das noted that the changing outlook for commodity prices also changes the assessment of India’s current account deficit in 2022-23, which is now expected to remain well below sustainable levels.
“At a time when food security is threatened worldwide by shortages and soaring prices, India’s large buffer stocks of food grains supplement domestic supply and ensure national food security,” he said. -he declares.
Das pointed out that India’s foreign exchange reserves of $561 billion (as of August 26) provide a cushion against external shocks, as demonstrated day by day. In addition, the reserves are also reinforced by term assets.
“The health of our banking system is sound. It is well capitalized and well provisioned, with better asset quality. This is an essential pillar of financial stability and should have a positive impact on financial markets,” he said.
According to Das, reflecting these fundamental factors, the rupee has moved in an orderly fashion over the current fiscal year so far.
“He held his ground in a world of sharp depreciation in other currencies of emerging market economies and advanced economies.”
“While the US dollar has appreciated by 11.8% in the current financial year so far, the INR has depreciated by 5.1%, which is among the lowest in the world “said the governor.
The RBI is regularly present in the market, providing liquidity and confidence to facilitate its smooth and normal functioning.
Going forward, monetary policy will remain vigilant, agile and calibrated to ensure price stability while supporting growth, Das said.
The Governor said there are certain areas, such as service delivery to small customers and retailers, where the performance of market players can still improve.
“Although there has been a steady increase in the number of secondary market transactions under the RBI Retail Direct Scheme, there remains considerable room for improvement to ensure liquidity for retail investors throughout trading hours. market on the NDS-OM platform.”
“We continue to receive representations from customers, particularly those who trade forex with small notes, about fair pricing of forex products,” he said.
A research study conducted by some RBI officers found empirical evidence of the presence of considerable price discrimination in the OTC FX derivatives market. The services provided by banks on the FXRetail platform require special attention. Response time and customer onboarding on the platform can be faster.
September 05, 2022