RBI Governor Shaktikanta Das Announces Positive Economic Trends and Advises Banks on Loan Practices
RBI Governor Shaktikanta Das announced a positive shift in foreign portfolio investments with net inflows of USD 9.7 billion from June to August 2024. He highlighted a rise in foreign direct investment and a historical high in India’s foreign exchange reserves at USD 675 billion.
Das noted a moderation in India’s Current Account Deficit to 0.7% of GDP in 2023-24, down from 2.0% in 2022-23. He said, “Buoyancy in services exports and strong remittance receipts are expected to keep CAD within sustainable levels in Q1:2024-25. We expect CAD to remain eminently manageable during the current financial year.”
Governor Das also addressed growing concerns related to home equity loans, or top-up housing loans, which have been increasing briskly by a few entities. He advised banks and NBFCs to take proactive monitoring of such loans, stating, “Such practices may lead to loaned funds being deployed in unproductive segments or for speculative purposes. Banks and NBFCs would, therefore, be well-advised to review such practices and take remedial action.”
Das reported that the Purchasing Managers’ Index (PMI) for manufacturing stood at a strong 58.1 in July, while the Services PMI was recorded at 60.3 in July 2024. The Index of Industrial Production (IIP) showed accelerated growth in May 2024, maintaining an elevated level indicative of continued growth.
Doubts Revealed
RBI -: RBI stands for Reserve Bank of India. It is the central bank of India, which means it manages the country’s money and banking system.
Shaktikanta Das -: Shaktikanta Das is the Governor of the Reserve Bank of India. He is the person in charge of the RBI and makes important decisions about India’s money and banking.
foreign portfolio investments -: Foreign portfolio investments are when people or companies from other countries invest money in India’s stocks, bonds, or other financial assets.
net inflows -: Net inflows mean the total amount of money coming into the country from investments, after subtracting the money that goes out.
USD 9.7 billion -: USD 9.7 billion means 9.7 billion US dollars. It’s a way to measure a large amount of money in a currency that many countries use.
foreign direct investment -: Foreign direct investment is when people or companies from other countries invest directly in businesses or factories in India.
foreign exchange reserves -: Foreign exchange reserves are the money and other assets that the RBI holds in different currencies to help manage the country’s economy.
USD 675 billion -: USD 675 billion means 675 billion US dollars. It’s a very large amount of money that the RBI has saved up.
Current Account Deficit -: Current Account Deficit is when a country spends more money on imports and other expenses than it earns from exports and other income.
0.7% of GDP -: 0.7% of GDP means that the deficit is 0.7% of the total value of all goods and services produced in India in a year.
top-up housing loans -: Top-up housing loans are extra loans that people can take on top of their existing home loans, usually for home improvements or other needs.
collateralized loans -: Collateralized loans are loans that are backed by something valuable, like a house or a car, which the bank can take if the loan is not repaid.
manufacturing and services sectors -: The manufacturing sector includes businesses that make products, like cars or clothes. The services sector includes businesses that provide services, like banking or healthcare.