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RBI policies softened COVID-19 blow to economy: Shaktikanta Das

I would like to unambiguously reiterate that the Reserve Bank remains steadfast to take any further measures, as may be necessary, while at the same time remaining fully committed to maintaining financial stability, Das said.

twitter-logoBusinessToday.In | January 16, 2021 | Updated 19:28 IST
RBI policies softened COVID-19 blow to economy: Shaktikanta Das
RBI Governor Shaktikanta Das

RBI Governor Shaktikanta Das has stated that the country's central bank remains ready to take any further measures which may be necessary to support economic growth without compromising on its financial stability. The RBI Governor was delivering an address at 39th Palkhivala Memorial Lecture on Saturday i.e January 16.

"I would like to unambiguously reiterate that the Reserve Bank remains steadfast to take any further measures, as may be necessary, while at the same time remaining fully committed to maintaining financial stability," Das said.

Das stated that principal objective during the COVID-19 pandemic was to aid economic activity in the country. Das explained that RBI policies helped in softening the economic impact of the COVID-19 outbreak.

The RBI Governor emphasised that in order to maintain financial stability, banks should raise resources in advance as a deterrence. "In future, financial institutions in India have to walk a tightrope in nurturing the economic recovery within the overarching objective of preserving long-term stability of the financial system," Das said.

Das explained that banks maintaining buffers and raising capitals will be important not only for ensuring credit flow but also for building resilience within the financial system.

"We have advised all banks, large non-deposit taking NBFCs and all deposit-taking NBFCs to assess the impact of COVID-19 on their balance sheet, asset quality, liquidity, capital adequacy, and work out possible mitigation measures, including capital planning, capital raising, and contingency liquidity planning, among others," he said.

Several large public and private sector banks have already raised capital while some  plan to take advantage of benign financial conditions to raise more resources. "This process needs to be put on the fast track," he added.

Das explained that recent experiences around the nation during the outbreak have suggested that banks, non-banks, financial markets and payment systems remain central to financial stability issues. "In this sense, the overall objective of financial stability policies should be closely intertwined with the health of the real economy," Das noted.

He further added, "The financial stability needs to be seen in a broader perspective and must include not just the stability of the financial system and price stability but also 'fiscal sustainability and external sector viability'."

Das noted effective risk management function, assurance mechanism will have to be supported by good governance. He added that NBFCs and banks need to identify risks and manage them effectively.

Also Read: RBI Governor Shaktikanta Das says stronger governance structure needed in NBFCs, banks

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