RBI’s new Governor Sanjay Malhotra, succeeding Shaktikanta Das
The Reserve Bank of India (RBI) is set for a change at helm as Sanjay Malhotra prepares to step in as governor, succeeding Shaktikanta Das. Malhotra’s tenure begins amidst significant challenges, including navigating economic growth, inflation control and exchange rate stability critical areas where Das faced ongoing battles.
The Indian rupee is under significant pressure after the US elections as a strong dollar and foreign portfolio investors (FPIs) pull out funds from the Indian market. Government ministers are urging soft interest rates to boost investment. However, this poses a tough challenge for the Reserve Bank of India (RBI), which needs to balance rate cuts with managing exchange rate stability.
Economists describe the RBI’s challenge as the “impossible trinity” – a situation where the central bank cannot simultaneously achieve independent monetary policy, exchange rate stability and unrestricted capital flows. Current forex trends underscore this tension, with the rupee weakening in the non-deliverable forward market, signaling potential pressure in the coming trading sessions.
A rate cut in February to counter the economic slowdown is being considered but remains a challenging prospect due to rising inflation and currency volatility. Rahul Bajoria, an economist at Bank of America, described the Reserve Bank of India’s predicament as a “three-body problem,” reflecting its difficulty in managing slowing growth, persistent inflation, and exchange rate pressures simultaneously. courtesy https://economictimes.indiatimes.com/
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Regulatory and Retail Challenges
Incoming RBI Governor Sanjay Malhotra faces a formidable task in implementing transformative regulatory measures. Among them is a proposal requiring banks to provision for bad loans based on expected credit losses. While this reform aims to enhance long-term stability in the financial sector, it may temporarily dent banks’ profitability and constrain their lending capacity.
Sanjay Malhotra is a 1990-batch Indian Administrative Service (IAS) officer from the Rajasthan cadre. He holds a degree in Computer Science Engineering from the Indian Institute of Technology (IIT), Kanpur. He earned his Master’s in Public Policy from Princeton University in the US.
Balancing Loan Provisions and Digital Banking Challenges
The RBI is pushing for stricter provisions on delayed project loans, a step aimed at discouraging funding for incomplete projects. However, this could inadvertently limit corporate investments at a time when the government is relying on banks to support large-scale infrastructure financing.
Meanwhile, the rapid growth of digital banking has brought new challenges, including a rise in online fraud cases. While banking systems remain robust, fraudsters are increasingly exploiting consumer trust, highlighting the need for greater cybersecurity awareness and protection measures.
