February 25, 2021
Governor says central bank is getting ready to launch own digital currency, according to Mint newspaper.
The Reserve Bank of India (RBI) has concerns about the impact of cryptocurrencies on financial stability and has conveyed them to the central government, governor Shaktikanta Das said.
“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,” Das said in an interview to CNBC-TV18.
“I want to make it clear that blockchain technology is different. Blockchain technology benefits have to be exploited, that is another thing. But on crypto, we have major concerns from the financial stability angle and we have shared it with the government. The government will consider and take a call,” he added.
In 2018, RBI had banned banks and other regulated entities from supporting crypto transactions after it found digital currencies were used to commit fraud after demonetization. Last year, the Supreme Court struck down the curbs after cryptocurrency exchanges challenged the move.
The government is now planning to introduce a bill in Parliament barring companies and individuals from dealing in cryptocurrencies while it creates a framework on an official digital currency.
Das also said the RBI is “very much in the game” and is getting ready to launch its own digital currency. “Central bank digital currency is a work in progress. The RBI team is working on it, technology side and procedural side, how it will be launched and rolled out,” he added.
Das tried to assuage market concerns on surplus liquidity and government borrowing, saying the central bank will ensure an orderly evolution of the yield curve. He assured the RBI will not pull out liquidity prematurely and stifle growth.
“If you go back into my monetary policy statements, right from October onwards—October and then again in February—I have given a very clear signal and explicit guidance to the bond markets. What I have said is that in RBI, we are expecting a cooperative working with the market and we expect an orderly evolution of the yield curve,” he said.
Das’s comments come at a time when the yield on the benchmark bond has been rising persistently despite RBI’s efforts to keep it at 6%. The 10-year bond yield touched 6.19% on Monday, the highest since 24 August.
RBI has been devolving auctions, or forcing underwriters of bonds to buy the bonds, or even cancelling auctions to check yields.
However, the bond market was not enthused by the governor’s comments, and the yield on the 10-year benchmark fell just 2 basis points from its previous close to close at 6.147.
The market expects RBI to step up bond buying through open market operations (OMOs), as the government plans to borrow ₹12 trillion in the next fiscal year. RBI has done OMOs of more than ₹3 trillion in the current financial year.
Copyright © 2021 Mint
Phto courtesy Financial Express