3 massive challenges Sanjay Malhotra will face as RBI governor – Firstpost

Sanjay Malhotra would be the Reserve Financial institution of India (RBI) from December 11, 2024. He succeeds Shaktikanta Das whose tenure ends on Tuesday.

A seasoned bureaucrat, Malhotra would be the twenty sixth Governor of the RBI.

Malhotra, a 1990-batch Rajasthan cadre IAS officer, will function the RBI governor for the interval of three years.

Who’s Sanjay Malhotra?

1 – Malhotra is serving as Secretary (Income) within the Ministry of Finance. He has greater than 33 years of expertise in public coverage.

2 – Previous to that, he was working as an officer on particular obligation (OSD) within the income division.

3 – Earlier than serving as an OSD, Malhotra held the submit of Secretary within the Division of Monetary Companies (DFS).

4 – Malhotra has in depth expertise in finance and taxation each on the state and central authorities ranges.

5 – He’s the ex-officio secretary of the Items and Companies Tax (GST) Council.

6 – Malhotra is an engineering graduate in laptop science from the Indian Institute of Expertise, Kanpur (IIT Kanpur), and holds a grasp diploma in Public Coverage from Princeton College, the US.

7 – He has labored in multifarious sectors, together with energy, finance and taxation, info know-how, and mines, amongst others.

Malhotra is assuming the cost at a tricky time for the RBI — amid rising stress to chop rates of interest.

Challenges earlier than Sanjay Malhotra because the RBI governor

Malhotra should stroll a tightrope because the RBI governor as he takes the baton when there’s a urgent have to preserve inflation manageable whereas giving a robust push to India’s financial system. Additionally, there was a rising name for an rate of interest reduce. India’s central financial institution has saved rates of interest unchanged for almost two years underneath Das over inflation dangers.

He can be going through the problem of balancing financial development, inflation and trade charge stability, one thing that outgoing RBI Governor Das saved combating.

Malhotra will even must swiftly cope with the problems like rising digital fraud and want to handle retail monetary product mis-selling.

1 – Bringing rupee again to good well being as greenback seems set for additional strengthening

The most important battle that the incoming RBI governor faces is on the rupee entrance. The INR has come underneath large stress after Donald Trump’s win within the 2024 US election, with the greenback strengthening and overseas portfolio traders (FPIs) pulling out a internet Rs 21,612 crore in November.

The Indian rupee has been touching document lows regardless of RBI rifling by means of its mammoth foreign exchange reserves to prop up the unit.

As per reviews, after Trump assumes workplace on January 20, 2025, there’s a excessive chance of commerce and foreign money wars. Preserving that in thoughts, the RBI must tread very rigorously within the aggressive geopolitical situation.

2 – Preserving GDP growth-inflation equation in stability

Malhotra will start to move RBI at a time when the retail inflation is above the consolation zone and the financial development has slowed down.

For Malhotra, the foremost job could be to rein in inflation and align it with the goal of 4 per cent. He should take measures that can help financial development.

Inflation is measured by shopper value Index (CPI). In October, headline CPI surged above the higher tolerance stage to six.2 per cent from 5.5 per cent in September.

In the meantime, India’s financial development moderated sharply within the second quarter ended September 2024. The actual gross home product (GDP) registered development of 5.4 per cent.

3 – Making certain wholesome credit score circulation to the trade

Because the RBI governor, Malhotra should deal with the incremental credit score demand. Retail prospects are largely looking for various funding alternatives, which is weighing on banks’ funding. Resulting from this, banks are turning to short-term non-retail deposits and different legal responsibility devices to fulfill the mounting credit score demand.

Nonetheless, this reliance on short-term measures are anticipated to pose structural liquidity dangers to the banking system.

There are worries concerning the rising credit score development in unsecured shopper loans, equivalent to bank card debt, regardless of regulatory measures to extend threat weights in these segments. This development wants exact monitoring of underwriting requirements and post-sanction assessments to forestall long-term dangers.