The Reserve Bank of India is scheduled to announce its sixth bi-monthly monetary policy for 2018-19 on February 7, which will be the first one under the new RBI Governor Shaktikanta Das, who took over as 25th Governor of RBI last month following the sudden exit of Urjit Patel. Ahead of the crucial policy meeting, Das on Monday met the heads of the state-owned banks to take stock of the banking sector.
"Basically the idea was convey to them (bank chiefs) the regulator's expectation from the banking sector in general, and public sector banks in particular, and also to get from them their understanding of the current banking situation, to get an understanding about the future outlook, the sense they have," Das said after the meeting.
According to SBI Chairman Rajnish Kumar, the new Governor was very receptive to whatever bankers have submitted. The meeting saw Das highlighting the importance of PSBs for the economy, especially at the present juncture in helping meet broader economic goals. He also flagged the need for PSBs to extend credit while observing prudential norms but without excessive conservatism.
This meeting assumes significance as it comes just days ahead of Budget 2019. Moreover, the banking sector is just coming out of a bad loan crisis and 11 out of the total 21 PSBs are under the central bank's Prompt Corrective Action framework.
Interim Finance Minister Piyush Goyal also addressed the public sector bank (PSB) CEOs in the second-half of the day. This was his first interaction with the bank chiefs since he took over the portfolio in Arun Jaitley's absence. He exhorted the PSBs to step up lending to the agriculture sector and micro, small and medium enterprises (MSMEs) as well as the housing sector to meet the Housing for All by 2022 target, and assured full support to them.
Observing that the Insolvency and Bankruptcy Code (IBC) has helped these lenders to recover over Rs 1 lakh crore till the third quarter of this fiscal, Goyal exuded confidence that the bankruptcy law would make them more profitable in the near future. "We have discussed how working of IBC has helped them recover large amount of money both through the IBC mechanism and NCLT [National Company Law Tribunal], and in many cases without having going to NCLT through the pressure that is built up on the large borrowers," he said after the meeting. Goyal added that the meeting also discussed an internal mechanism to resolve cases under the RBI guidelines and within the IBC framework to facilitate a faster resolution.
On the back of recapitalisation of PSBs by over Rs 2.6 lakh crore and comprehensive reforms for better underwriting of loans as well as the recovery of over Rs 2.8 lakh crore since the clean-up drive kicked-off in 2015, the PSBs reportedly committed to significantly step up the level of domestic credit growth from 9.1% year-on-year at the end of Q2 of this fiscal.
According to Goyal, the bankers also agreed to work further on increasing use of advanced data analysis and, where possible, artificial intelligence algorithms for better, faster and hassle-free credit decisions and monitoring of accounts.
So what's on the cards at the upcoming monetary policy review meeting? It is widely expected that the apex bank will cut the interest rate and change its policy stance back to 'neutral' from 'calibrated tightening' on the back of softer inflation.
The inflation based on the Consumer Price Index (CPI) eased to an 18-month low of 2.19% in December compared to 2.33% in November and 5.21% December 2017. Meanwhile, Wholesale Price Index (WPI)-based inflation eased to an eight-month low of 3.8% in December from 4.64% in the preceding month.
(With PTI inputs)