During the time of COVID, the Monetary Policy Committee (MPC) consciously decided to tolerate inflation — which was higher than 4 percent up to 6 percent — because the situation required that, Reserve Bank of India (RBI) governor Shaktikanta Das said at an event on Friday

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"If we had been very firm in maintaining 4 percent and kept the rates unduly high, I'm sorry, the consequences of that approach would have been disastrous for the economy," he said at the FE Modern BFSI Summit.

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Governor Shaktikanta Das announced the MPC's decision to hike the key lending rate by only 40 basis points on June 8 at a time when other central banks have lined up aggressive hikes in COVID-era interest rates to tackle decades-high inflation.

Das said that growth during the pandemic was of utmost importance, and it is also defined in the RBI mandate and that the central bank keeps in mind the growth requirements.

"The economy contracted by 6.6 percent. If we had adopted a tighter policy, then it would have been sort of disastrous for the economy,” Das said.

Meanwhile, the RBI governor announced that the RBI would unveil guidelines to regulate digital lending soon. He made strong remarks on the unruly behaviour of loan recovery agents in regulated and non-regulated entities. A working group was set up by the RBI in January 2021 to study issues surrounding digital lending apps and suggest regulations.

He also said that the RBI doesn't feel any bank should open separate digital banks as the regulator feels the move will carry risks.

Watch the accompanying video for more details

(Edited by : Abhishek Jha)

First Published:Jun 17, 2022 4:04 PM IST