Context:
On completing 90 years of its journey, the Reserve Bank of India (RBI) reaffirmed its commitment to ensuring monetary stability, trust in the financial system, and support for economic growth. The theme for this significant milestone, ‘Stability, Trust, and Growth’, encapsulates RBI’s core values, focusing on its role in maintaining a resilient financial ecosystem, enhancing public trust, and contributing to India’s economic prosperity.
Key Pillars of RBI’s Mandate
Price Stability
- Objective: To maintain stable prices and control inflation, which can erode the value of money, particularly affecting the poor.
- Target: Aiming for 4% CPI inflation with a 2% band.
- Approach: Ensuring moderate inflation to foster economic growth, avoiding the risks of both stagnation and excessive price volatility.
- Future Focus: A review of the flexible inflation targeting framework in collaboration with the government to create favorable conditions for both inflation control and economic growth.
Financial Stability
- Objective: Ensuring the health of financial institutions, which directly supports economic activities.
- Achievements: India has maintained a stable financial system with well-capitalized banks and Non-Banking Financial Companies (NBFCs).
- Focus: Ensuring financial institutions are resilient, managing risks effectively, and continuing to support real sector activities.
External Stability
- Objective: To maintain stable foreign exchange rates, crucial for importers, exporters, and investors.
- Strategy: Ensuring sufficient foreign exchange reserves and a manageable current account balance to weather external shocks.
- Outlook: RBI’s focus will be on managing excessive forex volatility, maintaining stability without targeting specific exchange rate levels.
The Importance of Trust
- Currency Integrity: Trust in currency is fundamental for its acceptance and use in daily transactions.
- Public Confidence: Trust ensures that individuals feel secure when depositing their money in banks and when relying on monetary policy to control inflation expectations.
- Financial Stability: Trust in financial institutions, payment systems, and settlement processes is integral to a stable financial system.
- Transparency and Independence: RBI strives for transparency in its operations and accountability while maintaining independence, which further strengthens public trust.
Growth and Development
- Vision: Aligning with the government’s goal of a Viksit Bharat (Developed India) by 2047, RBI aims to support inclusive and accelerated economic growth.
- Proactive Measures: RBI’s approach has been both pragmatic and visionary, including a strong response to the COVID-19 pandemic to stabilize the economy.
- Financial Inclusion: Expanding access to financial services, particularly for the underserved, is central to fostering equitable growth. RBI will continue to promote the use of technology to enhance lending capabilities and support sustainable growth.
Technological Advancements
- Key Innovations:
- Unified Payments Interface (UPI)
- Account Aggregator
- Central Bank Digital Currency (CBDC)
- Focus: Leveraging technology to deepen financial inclusion, improve financial management, expand credit, and enhance customer service experience.
- Global Integration: Efforts to internationalize the rupee and globalize India’s payment systems are ongoing, aiming to make India’s financial infrastructure globally recognized.
RBI’s Future Commitment
- Values: RBI remains committed to upholding the values of integrity, transparency, accountability, and professionalism.
- Goals: The central bank continues to foster a safe, secure, and stable financial system that aligns with the aspirations of the nation.
- Rededication: As Mahatma Gandhi once said, “The future depends on what we do in the present.” RBI reaffirms its rededication to serving the nation, ensuring a robust financial system that supports the country’s growth and well-being.
In essence, as RBI celebrates its 90th anniversary, its focus on stability, trust, and growth continues to guide its path forward, ensuring a resilient financial system that contributes to the prosperity of India and its citizens.
