RBI Governor Shaktikanta Das today announced that the limit of collateral free agricultural loans has been increased from one lakh to 1.6 lakh. Addressing the post monetary policy announcement in Mumbai today, Mr. Das said the decision has been taken in view of the overall inflation and rise in the agricultural input costs since 2010 when the limit was last revised. Mr. Das said this move will enhance coverage of small and marginal farmers in the formal credit system.

Earlier today, in his maiden bi-monthly policy review, the Monetary Policy Committee headed by Mr. Das reduced the policy repo rate by 25 basis points from 6.5 percent to 6.25 percent and also changed the policy stance from calibrated tightening to neutral. 

The RBI Governor said he expects banks to transmit the rate cut benefit to customers and will have an interaction with all the banks in this regard within the coming fortnight. On the liquidity front, Mr. Das said that RBI is constantly and continuously monitoring the liquidity situation and based on the requirement, will ensure that there is no liquidity scarcity.

On the unexpected rate cut, Mr. Das said the MPC has factored in the possibility of fiscal slippage post various budget proposals and also the inflation outlook. Stating that the primary objective of RBI remains price stability, Mr. Das said that inflation is likely to touch the figure of 3.9 percent by the end of this year. 

RBI Governor said the expenditure to be incurred on the announcements made in the interim budget will not affect inflation in the short term. He added that RBI expects GST revenue to pick up considering that all the systems and procedures have now been streamlined.   

On the PM Kisan Scheme, the RBI Governor said the measure may result in boosting rural demand in certain pockets and it would aid rural purchasing power, especially agricultural products like seeds, fertilizers, etc.

Talking about the speculated dividend payment to the government, Mr. Das said RBI is duty-bound to pay the dividend to the government as per the norms of RBI Act. He said the RBI board will examine the Bimal Jalan Committee report on excess surplus once it is submitted and decide accordingly. He, however added that the decision of RBI board in this regard will be as per the highest principle and accounting norms and practices of central bank.

On the Prompt Corrective Action -PCA framework and the recent lifting of restrictions on three PSU banks, Mr. Das said RBI is continuously monitoring the performance to banks under PCA and examining their benchmark indicators. He said other banks will be taken out of PCA as soon as there is sizeable improvement in their performance.

When asked about ICICI Bank’s former CEO Chanda Kochhar’ indictment by the Srikrishna panel, the RBI Governor said it is for the investigating agencies to take further action. #casansaar (Source - PIB)