Summary of this article
RBI says IDFC First Bank fraud poses no systemic risk
Inflation target unchanged despite revised CPI and basket
CBDC rollout to remain gradual with features under evaluation
The Reserve Bank of India (RBI) is monitoring a case that was recently detected in IDFC First Bank, with RBI Governor Sanjay Malhotra saying that the problem does not have any systemic implications. The bank disclosed the Rs 590 crore issue on Sunday, linking it to employees at its Chandigarh branch.
After the announcement, the bank's stock fell by 16.2 per cent on the BSE, closing at Rs 70 on Monday. Malhotra made the comments after the RBI's Central Board meeting. Finance Minister Nirmala Sitharaman was also present at the meeting.
RBI has stated that the problem seems to be localised to a particular branch and does not have any implications for the banking system as a whole. RBI will continue to monitor the situation and make sure that corrective actions are taken.
Such cases often create concerns among depositors and investors. However, RBI's comments have reassured that the problem is localised and is not likely to have any spillover effects on the financial system.
Inflation Outlook And CPI Revision
Regarding inflation, Malhotra explained that the RBI will make new projections available before the monetary policy review in April. This follows changes to the Consumer Price Index (CPI), which now takes into account a new base year and consumption patterns.
The new CPI series has lowered the weight of food products, added new categories, and removed old ones. Using the new series for 2024, the retail inflation rate for January 2026 was 2.75 per cent.
However, RBI does not find it necessary to change its inflation target of 4 per cent, with a tolerance range of 2 percentage points on either side. Malhotra explained that the change is helpful in measuring inflation but does not make a big difference in the policy framework.
The central bank has already made recommendations to the government regarding the structure of the inflation target, which is expected to be formalised by the government soon.
Liquidity Measures And Debt Operations
RBI also spoke about liquidity conditions, saying that it will make efforts to ensure that there is adequate money in all market segments. Malhotra explained that the recent bond switch operations are not for liquidity but for managing government debt.
Earlier in February, two switch operations of a total of Rs 1.13 lakh crore were made. These included the swapping of near-term maturing securities for longer-duration bonds, which have the effect of stretching out repayment timelines.
The RBI Governor also added that certain securities in RBI's holdings were due to mature in FY27, leading to such operations. Such actions are part of the regular toolkit of the central bank and do not reflect any change in its policy approach.
Digital Currency Rollout Still In Testing Phase
On the Central Bank Digital Currency, or CBDC, Malhotra stated that it is meant to supplement and not substitute existing forms of money and payment systems. RBI has been conducting pilot projects for the retail form of the CBDC since 2022.
Efforts are being made to implement the offline capability, which would be beneficial for accessibility. But the large-scale implementation will only be considered when the system is completely developed and ready.
He also said that the expansion of the CBDC will be gradual, but it is expected to improve payment services by providing functionalities that existing systems do not have.
