Whether it’s the “horse requiring a tight leash” or addressing the “elephant in the room,” Shaktikanta Das has often relied on vivid metaphors to describe interest rate policies.
Das, 67, the outgoing governor of the Reserve Bank of India will demit office on December 10, 2024, after serving for six years, making him the second-longest serving RBI Governor.
A 1980 batch IAS officer, served as the Secretary of the Department of Revenue and Department of Economic Affairs. Post-retirement, he was appointed as a Member of the 15th Finance Commission and G20 Sherpa of India.
Replacing Shaktikanta Das is Sanjay Malhotra, currently serving as the Revenue Secretary in the Ministry of Finance.
Here is looking at Das’ six years of steering through the turbulent waters of the India Economy:
Sailing through the COVID-19 Economic Crisis
When the COVID-19 pandemic struck in 2020, the global economy faced an unprecedented crisis, and India was no exception. Economic activity came to a grinding halt, and GDP contracted by -6.6 per cent in FY21.
In response, the RBI introduced a six-month loan moratorium, offering critical relief to over 60 million borrowers facing financial stress.
To encourage lending and mitigate the impact of the lockdown, the central bank slashed the repo rate by 115 basis points, bringing it to a historic low of 4 per cent. This rate cut, coupled with liquidity infusion measures like the Targeted Long-Term Repo Operations (TLTROs) amounting to Rs 1 lakh crore, were to ensure that funds reached critical sectors such as MSMEs and non-banking financial companies (NBFCs).
Additionally, a one-time loan restructuring framework provided struggling businesses with breathing space to recover. Finally, Indian GDP growth rebounded to 8.7 per cent in FY22.
Introduction of the Digital Rupee
Under Das’s leadership, RBI launched the Central Bank Digital Currency (CBDC), known as the Digital Rupee, in 2022. The CBDC rollout began with pilot projects for wholesale and retail use, marking India’s foray into the world of central bank-backed digital currencies.
By mid-2024, over 500,000 retail users and 50,000 merchants were actively using the Digital Rupee in major cities. The initiative aimed to modernize India’s payment ecosystem, reduce the dependency on cash, and ensure greater transparency in financial transactions. With the CBDC, India positioned itself among the global leaders in financial technology innovation.
Fast forward to 2024, RBI in April proposed expanding the accessibility of its retail Central Bank Digital Currency (CBDC-R) by allowing non-bank payment system operators, such as PhonePe and Google Pay, to offer CBDC wallets.
Withdrawal of Rs 2000 Notes
In May 2023, the RBI announced the withdrawal of Rs 2000 denomination banknotes, a move aimed at improving currency management and curbing risks associated with counterfeit notes.
Unlike the sudden demonetisation of 2016, this decision was implemented with a clear timeline.
As of the latest update from RBI, 98.08 per cent of the Rs 2000 banknotes in circulation as on May 19, 2023, has since been returned.
Measures for the Banking System
Indian Central Bank introduced stricter capital adequacy norms and enhanced frameworks for monitoring asset quality. By supporting the Insolvency and Bankruptcy Code (IBC), the central bank addressed the issue of non-performing assets (NPAs), leading to a significant reduction in gross NPAs from 11.2 per cent in 2018 to 4.8 per cent by 2023.
Driven by improvements in asset quality, strong margins, and robust loan book growth amid a multi-year credit upcycle, the combined net profit of India’s 12 PSU banks has soared nearly 4.5 times in three years, reaching a record high of Rs 1,41,203 crore in FY24.
On a year-on-year basis, the profit pool of public sector banks grew by 35 per cent from Rs 1,04,649 crore in FY23. The State Bank of India (SBI), the country’s largest lender, accounted for over 40 per cent of the total earnings, posting an annual profit of Rs 61,077 crore.
Inflation Management
Inflation remained a central focus of Das’s tenure, particularly amidst external shocks like supply chain disruptions and volatile commodity prices. By leveraging the inflation-targeting framework introduced in 2016, the RBI ensured price stability while supporting growth.
During Das’s tenure, inflation largely remained within the mandated target of 4% ± 2%. Collaborative measures with the government, such as cutting excise duties on fuel and releasing buffer stocks of essential commodities, complemented the RBI’s monetary policies.
Promoting Financial Inclusion and Digital Payments
The Unified Payments Interface (UPI) witnessed exponential growth, with daily transactions surging from 10 million in 2018 to over 500 million by 2024. In October 2024, UPI witnessed 16.58 billion financial transactions, worth Rs 23.49 lakh crores, the highest ever since its inception.
The RBI also ensured that digital payment platforms became more inclusive by mandating accessibility features to benefit persons with disabilities. The launch of the Inclusive Digital Payments Index further tracked the progress of these initiatives, which extended financial services to rural and underserved areas.
