Reserve Bank of India (RBI) Governor Sanjay Malhotra has said that inflows through the Foreign Currency Non-Resident (Bank) [FCNR-B] and the other schemes have been ‘very robust’. In an interview with a private television channel, the RBI Governor said the strong inflows reflect confidence in India’s macroeconomic fundamentals and demonstrate the ability to attract foreign capital within a short period.
On the surplus liquidity in the banking system, Malhotra said the Reserve Bank has enough tools at its disposal to manage liquidity and is prepared to use them as needed. He added that some of the surplus liquidity would be withdrawn over time through currency circulation, forex intervention and banks’ reserve requirements amid rising credit growth. Malhotra added that the central bank’s objective was to maintain appropriate liquidity conditions and keep the weighted average call rate aligned with the repo rate.
The RBI Governor said the Monetary Policy Committee would reassess growth and inflation dynamics at its meeting next month amid rising prices of crude oil owing to the ongoing West Asia crisis. Sanjay Malhotra noted that the impact of higher crude prices on inflation would depend on the extent to which the increase is passed through to consumers.
He said the government has to a great degree, absorbed and cushioned the shock; as a result, the Indian economy has weathered it well. On stronger-than-expected growth in the April to June quarter, the RBI Governor said it was not entirely surprising. He added that incoming corporate data was also pointing to firmer growth. The central bank saw no signs of overheating, including in consumption loans.
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