RBI concerned over impact of cryptocurrency: Das
While Das did not elaborate further, the central bank had in the past expressed concerns on digital currencies being used for money laundering and terror funding.
New Delhi: The Reserve Bank of India (RBI) is concerned over the impact cryptocurrencies may have on the financial stability in the economy and has conveyed the same to the government, Governor Shaktikanta Das said on Wednesday.
“I want to make it clear that the 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,” Das said adding that the concerns about cryptocurrencies have been communicated to the government.
While Das did not elaborate further, the central bank had in the past expressed concerns on digital currencies being used for money laundering and terror funding.
The government is planning to introduce a bill in Parliament to bar companies and individuals from dealing in cryptocurrencies while creating a framework for an official digital currency.
The RBI had in 2018 banned banks and other regulated entities from supporting crypto transactions after digital currencies were used for frauds. The Supreme Court cut the curbs last year in response to a petition by cryptocurrency exchanges.
“Central bank digital currency is work in progress. RBI team is working on it, technology side and procedural side, how it will be launched and rolled out,” Das said in an interview with CNBC-TV18.
If this happens, the RBI will join other central banks including that of China, where it has electronic yuan.
No date for the rollout has been set.
On inflation targeting, the governor said the central bank’s internal working group will come out with its report on the target band in the next few days.
The Monetary Policy Framework, which mandates the Reserve Bank to maintain consumer price index or retail inflation at 4 per cent in a band of (+/-) 2 per cent, is coming up for review in March end.
Finance Minister Nirmala Sitharaman had last week stated that the government would review the inflation target band as the five-year term for the Monetary Policy Committee (MPC) is coming to an end.
The six-member MPC, headed by the RBI Governor, decides on the monetary policy keeping in mind this inflation target band.
Counting the benefits of the monetary policy framework, Das said inflation expectations of households and businesses are well anchored and stability of inflation confidence to both domestic and foreign investors.
“But for these COVID months when it crossed 6 per cent, inflation expectations have been well anchored. And when inflation expectations are anchored and inflation remains around the target of 4 per cent … it benefits the household, economy also… Also the other aspect is that the current framework has enough width 4 (+/- 2) per cent to deal with extraordinary situations, like the COVID…”I would believe that the current framework has…. achieved a lot and these gains have to be preserved, consolidated and not jarred,” Das said.
In the current fiscal, the retail inflation has hovered above the upper end of the target band of 6 per cent for the most part of the year and came back within 6 per cent limit in December 2020.
In January 2021, it fell to a 16-month low of 4.06 per cent.
Das said in the near term, inflation would remain benign below 6 per cent, even though core inflation remains elevated at around 5-5.5 per cent.
With regard to the budget announcement of privatisation of two public sector banks, Das said it is a major reform that the government has embarked upon and there is a constant dialogue with the RBI.
