RBI Governor Warns Banks with Large CRE Exposure May Be Targeted by Short Sellers
RBI Governor Shaktikanta Das expressed concerns about banks with significant commercial real estate (CRE) exposure, stating that they could become targets for short sellers. Speaking at the Bretton Woods Committee’s Future of Finance Forum in Singapore, he said, “Banks with large CRE exposure could be targeted by short sellers.”
Das emphasized that global growth remains stable but slow, and monetary policy needs to remain prudent. Governments should stay proactive, and policymakers worldwide must stay alert as a strong U.S. dollar increases debt-servicing costs for emerging markets. Additionally, he noted that global valuations have risen significantly, presenting challenges for many economies.
India’s Growth Potential Above 7.5%
Regarding India’s growth, Das highlighted that the country has the potential to grow at 7.5% or more, slightly above the RBI’s full-year forecast of 7.2% for 2024. Addressing the Bretton Woods Committee’s annual Future of Finance Forum, Das stated, “I believe India’s potential growth today is around 7.5% or even higher.”
He added, “This year, we expect to record a 7.2% growth rate by the end of the year.” However, slower growth in the first quarter (April-June) was due to lower government spending during the national elections. He also mentioned that India’s merchandise exports have underperformed due to weak external demand, though service exports have shown significant improvement.
Slight Rise in Inflation Rate
According to official inflation data released on Thursday, retail inflation saw a slight increase in August due to rising food prices, particularly vegetables. Despite this, inflation remained below the RBI’s 4% target. Factory output growth continued due to strong manufacturing performance, although a high base effect contributed to the numbers.
Data from the Ministry of Statistics and Programme Implementation (MoSPI) showed that India’s inflation rate rose to 3.65% in August 2024, compared to July. Even so, inflation remained at its second-lowest level in five years. The annual inflation rate based on the Consumer Price Index (CPI) was 3.65%, higher than the estimated 3.47%.
For August 2024, CPI inflation remained the second-lowest year-on-year level in the past five years. Inflation rates for rural and urban areas were 4.16% and 3.14%, respectively. The MoSPI data also showed that inflation in subgroups like ‘spices’, ‘meat and fish’, and ‘pulses and products’ saw a decline. Food inflation for August 2024 was the second-lowest since June 2023.
Commenting on the CPI fluctuations, Das remarked, “Amid a sudden decline in CPI inflation in India, the RBI should stay focused on its target.”
This economic overview highlights the RBI’s cautious stance as global and domestic pressures continue to influence India’s economy. With inflation under control and growth expectations high, the Indian economy is poised to navigate challenges effectively.
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