The steps taken by the central bank were ‘warranted’, given that lending standards were becoming loose in certain segments, he noted.
Kamath also highlighted that some players failed to utilise technology effectively, leading to customer challenges.
The RBI’s actions were timely and helped stabilise the financial system at a juncture where maintaining asset quality was becoming increasingly challenging.
With Sanjay Malhotra as the new RBI Governor, Kamath expects regulatory continuity, citing Malhotra’s experience in financial services and his grasp of technological disruptions in the sector.
Malhotra will take over as RBI Governor on December 11 for a three-year term.
This is the verbatim transcript of the interview.
Q: What do you make of the new RBI Governor appointment?
A: I would like to acknowledge all that Governor Das has done over many years, holding things steady right through COVID and the turmoil that we have seen in the last couple of years.
Governor Malhotra brings a wealth of experience, and I will just put it in context. This is the first governor that we would have who would have experienced leading a financial institution, who has experienced leading the Department of Financial Services, and then leading the revenue function in the country. And to top it up, Governor Malhotra is a computer science engineer.
If I look at RBI today, it’s in a very steady state, but the initiatives that they have taken are about technology. So we have absolutely the correct governor to guide us through the next phase of sustaining growth and then leveraging technology as we look at the next horizon for India.
Q: It is a tricky time. Growth has slowed and inflation remains sticky, largely due to the supply-side issues. The first monetary policy committee (MPC) meeting for Sanjay Malhotra will be in February. We had three outside members inducted into the MPC in October. We have the government advertising for the post of Deputy Governor. So we possibly have five new members. A lot of new blood in the MPC. Do you foresee any significant change from how the RBI has conducted monetary policy till now?
A: No. If you look back at history, it has always been a steady movement in exchange rates, currencies or policies. Never has there been anything happening suddenly. I would expect the same sort of steady hand going ahead from the governor.
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Everybody looks at the longer picture, which is a growth story that I don’t think we have ever experienced before, and I am sure the RBI governor will make sure that things stay stable as we go along this journey.
Q: In 2024, the RBI cracked the whip when it comes to lending practices. Be it non-banking financial companies (NBFCs), microfinance institutions (MFIs), digital lenders, or banks, and they helped steady the ship. This happened at a time when at the margin, asset quality cannot remain as pristine as seen for the last couple of years. With the experience that Sanjay Malhotra has and what the RBI so far has done in this area, what are your expectations?
A: Firstly, the steps that the RBI took were indeed warranted. I want to be explicit about it. These steps were warranted. Lending was getting loose, and some players were not using technology the way they could have, which resulted in the customers experiencing challenges.
So certain steps had to be taken by the Reserve Bank of India, which they have taken and that was good.
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Now, very interestingly, we have an incoming governor who has seen it as a secretary of the Department of Financial Services. So he knows what is happening in the marketplace. So he comes with that wealth of experience, having seen it from a slightly different position. Not a different lens but from a different position. So I would think that we would have continuity that everybody in the market expects, but more importantly, continuity at a time when technology is disrupting everything, and in Sanjay Malhotra, you have a person who has that technology bent and would be able to take forward the initiatives that the Reserve Bank has already put in effect.
Q: Do you see a sort of effort in terms of technology innovation or accelerated efforts with him at the helm now?
A: I would say that the RBI has done a remarkable job in terms of sandboxing and setting up institutions, and even now, various new initiatives are being taken. We now have a governor who also understands all these things, and he would be able to very easily take this forward, which is what the country needs to be a leader in financial services.
Today, we are admired as a country which uses financial technology very effectively, in our financial services marketplace. And that would, I am sure, continue with Sanjay Malhotra. He has got extra advantage with a background in computer science, which is where things are heading today. Almost everything that we do is driven by technology. There certainly he would be very comfortable. The organisation has already taken steps. So sure he will take these forward.
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