Shaktikanta Das: Shaktikanta Das sounds an alarm on cryptos

Synopsis

India’s ostensible demand and publicised interest in crypto currencies are likely exaggerated, and potentially a marketing ploy to lure more people to a novel asset class unapproved by the regulator, Reserve Bank of India (RBI) Governor Shaktikanta Das said on Wednesday.

Bulk of the investors, or about 70% or even more, have invested about ₹1,000- ₹3,000. Perhaps there is an effort to enrol as many people as possible, Das said.Mumbai: India’s ostensible demand and publicised interest in crypto currencies are likely exaggerated, and potentially a marketing ploy to lure more people to a novel asset class unapproved by the regulator, Reserve Bank of India (RBI) Governor Shaktikanta Das said on Wednesday. Das also reiterated his concerns over cryptos and added that the regulator’s recommendations were being actively looked at by the government.

“In terms of the amount that has been invested, it’s definitely growing and anecdotally we hear so many things,” Das said while speaking to a financial publication. “But I am not so sure about the numbers that are being quoted. Because, whatever information we have, with a reasonable amount of confidence I can say that the number of participants in the crypto market seems exaggerated.”

Bulk of the investors, or about 70% or even more, have invested about ₹1,000- ₹3,000. Perhaps there is an effort to enrol as many people as possible, Das said.
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The RBI governor also reiterated his concerns over the financial instability such investments could cause and stated that the government was actively considering its recommendations.

“People are doing a certain activity; as a central bank we have serious concerns from the macroeconomic and financial stability points of view,” he said. “We have given our detailed suggestions to the government on dealing with the issue. As far as I know, the matter is under active consideration of the government and it will decide.”

In the past few months, Indian investments in cryptocurrencies hit the $10 billion mark, ET first reported on November 1. Currently, around 105 million citizens, or 7.9% of Indians, have invested in cryptocurrencies through Indian exchanges, as per data compiled by CREBACO, a research firm.

Meanwhile, Das lauded the government for its decision to cut excise duty on petrol and diesel, adding that the government had addressed several supply side constraints that were seeping into inflation. The RBI is targeting a 5.3% inflation print for FY22.

Governor Das also expressed confidence in managing any volatility in the currency and said that it was unlikely India would see a repeat of the 2013 taper tantrum in the unlikely event of large value capital outflows. India’s forex reserves have topped an all-time high of $642.019 billion for the week ended October 29.

The RBI governor also asked banks to focus on risk pricing on retail and housing loans and expects demand for bank credit to pick up next year.

“There are signs of investment picking up next year and the demand for bank credit will pick up next year onward,” he said. “Investment credit, that is demand from the industrial and corporate sector, will pick up next year; that is the feedback I have got.”

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Updated: 11/10/2021 — 20:00