Amidst a raging debate on cryptocurrency on national channels, Reserve Bank of India Governor Shaktikant Das today said RBI has certain major concerns about cryptocurrency from the financial stability angle.
“I also want to make it very clear that blockchain technology is different. The benefits of it have to be exploited, that is another thing, but on crypto, we have major concerns from the financial stability angle. We have shared it with the government and government will consider and take a call,” he said.
Das also said that the RBI also has conveyed concerns about cryptocurrency to the government and it would sooner or later take a decision on it.
“We have certain major concerns about cryptocurrency. We have communicated them to the government. It is under consideration in the government and I do expect and I think sooner or later the government will take a call and if required the parliament also will consider and decide,” he said.
Asked whether the central bank would issue digital currency, Das replied in the negative, but said the RBI is working on a completely different digital currency.
“How will it be launched and how will it be rolled out? It is still work in progress and we are very much in the game. We are targeting to launch it. But if you ask me on a date, at this point of time it will be difficult for me to say,” he stated.
Many experts have similar views about cryptocurrency as the RBI Governor. Big Bull Rakesh Jhunjhunwala had called for a ban on it.
In an interview, Jhunjhunwala had said that he would never invest in cryptocurrency and pitched for banning it.
“I won’t buy Bitcoin even for $5. In the world, only the sovereign has the right to create currency. The dollar move of 1-2 percent is news but here the fluctuation is 10-15 percent in a day, hence the speculation is the highest,” Jhunjhunwala said.
The only genuine crypto assets are tokens or crypto-currencies which are asset-backed. However, so far, Bitcoin or all the other popular crypto-currencies are not asset-backed.
Vikas V Gupta, CEO & Chief Investment Strategist, OmniScience Capital said having cryptocurrencies is far too a riskier affair because they are not asset-backed.
“There are more than 4000 cryptocurrencies and we can as many as we can have. But, we don’t see any particular cryptocurrency worth it because it has no asset-backing,” he said.
On the other hand, the traditional currencies including rupees and dollars are backed by the countries’ GDPs, while crypto is backed by nothing, Gupta added.
Jay Thakkar, VP and Head of Equity Research at Marwadi Shares and Finance Ltd said cryptocurrencies are not accepted globally like any other currencies and hence should not be in use for now.
Replying to a query, Das said RBI will not withhold liquidity prematurely and it always has many known and unknown tools to to inject liquidity as and when is needed.
“For liquidity management, we have several instruments on our table. As and when the time is required, we will use various tools either to inject liquidity or now I have made very clear that pulling out liquidity should not be done prematurely in a manner that it could stifle growth,” he said in an interview with a multimedia news portal.
“We don’t want to create an impediment to the process of revival of economic activity. But as and when at a future date, it becomes necessary, there are enough instruments available with the RBI. Some of which have been used in the past. So the Central Bank has always got many known and unknown tools to deal with the liquidity situation,” he added.
Even today, Das said a large quantum of forex is flowing in and the RBI is also dealing with this situation.
“So markets should take cue from the signal which the Central Bank has been giving from time to time and the market should trust the RBI,” he said.
Das said the RBI has managed the Covid situation well and the market should trust the message coming out from the central bank.
“Our forward guidance has been much more explicit than ever before. There are some subtle messages on liquidity that markets should read. The signal was sufficiently clear in the February policy,” he added.
The Monetary Policy Committee (MPC) had kept the repo rate unchanged in the sixth and last bi-monthly monetary policy meeting for the financial year 2020-21.
The repo rate stands at 4 percent and the reverse repo rate is 3.35 percent.
I do not expect suddenly inflation to spike because the Reserve Bank has the necessary tools to monitor it very carefully.
On inflation, Das said it will remain well within the 6 percent upper threshold.
” I do not expect suddenly inflation to spike because the Reserve Bank has the necessary tools to monitor it very carefully. Whatever projections we have given, at this point of time, we stick to those projections. So the near term outlook, the inflation is going to remain well within the 6 percent upper threshold,” he said.
India has had good rabi crop and kharif sowing has been good, which have helped inflation remain elevated, he said.
Asked if there is a chance of seeing 13 per cent growth next year, Das said if the growth is higher than what RBI has projected, he would be happy.
“That will be one number we will be very happy to be proved wrong if it is upwards of 10.5 percent what we have projected … In fact, incidentally the bank deposits have grown by about almost 11 percent over the last one year. So credit off take, private sector investment also should crowd in. So a higher growth is always welcome,” he said.