As the tenure of Reserve Bank of India Governor Shaktikanta Das comes to a close, it marks the end of a transformative chapter in India’s financial history.
Appointed in December 2018 during a period of leadership uncertainty following the sudden resignation of his predecessor, Das stepped in to navigate the RBI through turbulent times.
His leadership saw India through numerous challenges, including the economic fallout of the COVID-19 pandemic, managing inflation, and ensuring financial stability.
With his 6 years of tenure concluding today, it’s time to reflect on the key milestones and decisions that reshaped India’s banking and financial landscape.
In 2018, the IL&FS default had a ripple effect across the financial sector, particularly for NBFCs that were heavily reliant on short-term borrowing and commercial paper markets. To stabilise the sector, the RBI, under the leadership of Governor Shaktikanta Das, introduced several measures, including the launch of the Special Liquidity Scheme (SLS).
This scheme provided funding to solvent NBFCs facing liquidity constraints. Additionally, the RBI implemented a Liquidity Risk Management Framework for NBFCs, mandating the maintenance of liquidity coverage ratios and strengthening governance structures to ensure long-term financial stability. These steps were crucial in restoring confidence and liquidity in the sector.
It was during Mr. Shaktikanta Das’ tenure as Governor of the Reserve Bank of India (RBI) that decisive actions were taken during the COVID-19 pandemic. In order to address the economic downturn and provide relief to various sectors the RBI made historic rate cuts.
RBI slashed the repo rate by 115 basis points (bps) from 5.15% to 4.00% between March and May 2020, marking the lowest level in over a decade. Additionally, the RBI injected liquidity into the economy by introducing measures like the Targeted Long-Term Repo Operations (TLTRO), aiming to support businesses and ensure financial stability during the crisis.
As per the recent data release on PIB, Digital payment transaction volumes grew to 18,737 crore in FY 2023-24, up from 2,071 crore in FY 2017-18, reflecting a compound annual Growth Rate (CAGR) of 44%. This milestone in the digital payment transaction would not have been possible without RBI’s policy support.
RBI has been instrumental in expanding UPI’s infrastructure and ensuring its security. It issued several guidelines, including the framework for Digital Payment Security, and supported the creation of the National Payments Corporation of India (NPCI), which oversees UPI’s functioning and promotes its adoption.
In response to systemic vulnerabilities highlighted by the Punjab and Maharashtra Cooperative (PMC) Bank fraud in 2019, the RBI significantly enhanced its regulatory oversight of cooperative banks.
As part of these efforts, the Reserve Bank introduced a comprehensive framework for Urban Co-operative Banks (UCBs) in 2022. The new guidelines establish a four-tiered regulatory structure based on deposit size and operational scope, alongside new net worth and capital adequacy ratio (CRAR) requirements to boost financial stability.
The Reserve Bank of India (RBI) announced the phased withdrawal of ₹2,000 currency notes from circulation on May 19, 2023.
This decision was part of a broader strategy for currency management, aimed at promoting the circulation of smaller denomination notes and ensuring a smoother monetary system. The RBI allowed a window for the exchange of ₹2,000 notes and assured the public of adequate availability of alternative currency notes during the transition period.
The RBI launched the Digital Rupee pilot, exploring blockchain technology for secure transactions. Initially introduced for wholesale transactions, the pilot has expanded to retail use, allowing the RBI to test the infrastructure and assess the broader adoption of CBDCs in India.
The government appointed Indian Administrative Services (IAS) officer Sanjay Malhotra as the next governor of the Reserve Bank of India (RBI) for a 3-year term. As he steps into office tomorrow, Malhotra will have to face a few important challenges immediately. The two of the most pressing issues being, managing the delicate balance between growth and inflation, alongside the rising threat of cybercrime.
Both of these issues are intricately linked to the evolving economic and technological landscape of India, and the RBI’s response under his leadership will be pivotal in ensuring financial stability and securing the country’s economic future.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
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