Decision to remove 3 banks from PCA after considering capital infusion by Centre, says RBI Governor Among the various issues Reserve Bank of India Governor Shaktikanta Das touched upon during his first post-policy interaction with the media was the February 12 circular of the central bank which mandates banks to classify loans as stressed even if there is a day’s default. Excerpts: What kind of inflationary impact does MPC see due to the policies announced in the Budget? How concerned is the MPC over fiscal slippage? The impact of various budget proposals and other developments have been factored into our projections. The possibility of fiscal slippage has been discussed. The government has said 3.4% fiscal deficit this year and 3.4% next year. That has also been factored into our inflation projections. We are working on the basis of those numbers. Will there be an interim dividend to the government? With regard to interim dividend, as when the central board takes a decision, it will be announced. Since you said that inflation will not rise above 3.9% for this calender year, did the MPC consider a 50 bps cut? Or do you think the space exists in 2019 itself? There are several discussions that take place in the MPC. As and when the minutes are given on February 21, it will be known. The shift in stance of monetary policy also provides flexibility and the room to address challenges to sustain growth of the Indian economy over the coming months as long as inflation outlook remains benign. The MPC’s decision will be data-driven and in consonance with the primary objective of the monetary policy to maintain price stability, keeping in mind the objective of growth. What convinced you to go for growth rather than inflation? In the RBI Act, price stability has been defined as 4%, plus/minus 2. Once that target is on board, and in the next 12-month horizon we see that inflation remains at a maximum of 4% or below, then I think there is room to act. And, the Act also says, ‘keeping in mind the objective of growth’. So, the decision of the MPC has not gone beyond the RBI Act. And we are also saying the decision of MPC will be data-driven. There have been demands to make certain changes in the February 12 circular. What is your view on the issue? At the moment, there is no proposal to modify the February 12 circular. RBI has removed three banks from PCA. How soon can we expect more banks to come out from PCA? We have watched the performance of the three banks and analysed in detail. We also took into account the capital infusion by the government. There is no scope for discretion. (Deputy Governor M.K. Jain): As long as there is some improvement in the benchmark parameters, it will be examined at the appropriate time. There are still concerns over liquidity for the NBFCs and the SME sector. How do you plan to address the issue? The Reserve Bank is constantly, continuously monitoring the liquidity situation, and based on requirements, we will ensure that there is no liquidity scarcity. What are the big concerns about the Indian economy going ahead? One is the monsoon. The second is crude oil prices and the overall external situation, for example, Brexit and how the U.S. economy is recovering. There are trade conflicts which are expected to get resolved but we do not know how much time it will take. So, these are the risk factors which will have an impact on our domestic economy, and which we are regularly monitoring.