RBI Optimistic on US Tariffs Impact

RBI Governor Sanjay Malhotra and Deputy Governor Rajeshwar Rao told the Public Accounts Committee (PAC) that they are “optimistic” about the impact of US tariffs on India. The RBI believes that in the long run, India could benefit from declining US-China trade ties as global supply chains diversify. The central bank is still assessing short-term impacts but sees no major threat to the Indian economy.

Focus on Banking Reforms

• The PAC’s overarching agenda was banking reforms, with two key meetings held:
  • One with top RBI officials
  • One with Department of Financial Services (DFS) and MDs of major nationalised banks (SBI, Indian Bank, Canara Bank, IDBI, PNB)

Key Discussions and Highlights

• Unregulated Lending:
  • The Banning of Unregulated Lending Activities Bill may be introduced in the next Parliament session to curb unauthorized lending by individuals or entities not regulated by RBI or any statutory body.
• 2018 SBI Recapitalisation Query:
  • PAC questioned DFS over a ₹8,000 crore infusion into SBI in 2018 despite the bank not requesting funds, a concern also flagged by the CAG in 2023.
• Banking Access in Remote Areas:
  • PAC raised the lack of bank branches in Naxal-affected and northeastern states.
  • Government and banks assured that banking access will be expanded to ensure a branch within 5 km in these areas within one year.
• Non-Performing Assets (NPAs):
  • PAC was informed that NPAs are on the decline.
  • Recommendations included:
    • Early warning systems for large defaulters
    • Categorisation of defaulters
    • Encouragement for banks to adopt an entrepreneurial rather than bureaucratic mindset

Strategic Direction

• The discussion indicates a tightening regulatory stance on informal lending and a push for greater financial inclusion.
• RBI’s positive long-term trade outlook reflects confidence in India’s potential to gain global market share.

BS