Home >News >India >FM Sitharaman, RBI discuss ways to exit from stimulus

Finance minister Nirmala Sitharaman and the Reserve Bank of India’s (RBI’s) board of directors on Tuesday discussed ways to exit the stimulus measures introduced to combat the economic impact of the covid pandemic in a post-budget review.

Sitharaman addressed the RBI board of directors on the thinking behind her budget for 2021-22 and the priorities of the government. The meeting which was held via videoconferencing also included minister of state for finance and corporate affairs Anurag Singh Thakur, finance secretary Ajay Bhushan Pandey and secretary, department of investment and public asset management Tuhin Kanta Pandey.

“The two key takeaways from the meeting were inflation targeting and credit expansion... (The matter of) what exit plans do the government and the RBI have in terms of coming out of the expansionary stimulus?" said a person who attended the matter, seeking anonymity.

“On privatization, FM mentioned that sudden developments should be avoided, alluding to the recent private sector bank mergers," he added.

The RBI had mentioned in its report on Trend and Progress of Banking in India 2019-20 that it is looking at a calibrated unwinding of emergency measures so that it does not lead to a repeat of the 2008-09 crisis when the stimulus led to higher inflation and surging bad loans. The RBI had introduced policy rate cuts and liquidity infusion, regulatory forbearance and time-bound resolution with additional provisions to ease the economic impact of the pandemic.

The meeting also reviewed the current economic situation, global and domestic challenges and various areas of operations of the RBI, including ways to strengthen grievance redress mechanisms in banks.

The Centre will also take up the matter of credit expansion with the RBI and banks separately, with the secretary of department of financial services expected to hold meetings with all stakeholders on Wednesday and Thursday in Mumbai, to focus on ensuring credit to micro, small and medium enterprises, manufacturing and capital raising by banks, said the person cited above.

RBI governor Shaktikanta Das has assured that the central bank will support the 12 trillion government borrowing programme in the next financial year in a non-disruptive manner.

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