Reserve Bank of India (RBI) Governor Shaktikanta Das on Thursday hinted that the central bank may announce further rate cuts or policy measures, if needed, to tackle the ongoing coronavirus crisis.
"We have not exhausted our ammunition, whether on rate cuts or other policy actions. We are constantly watchful and as and when we anticipate certain emerging situation, we'll deal with it," Das said.
RBI Governor said that the central bank will not withdraw the coronavirus-related dispensations immediately. It will be done in a calibrated manner. The RBI is monitoring the situation closely and will execute a very cautious plan with respect to unwinding relief measures such as interest rate cuts, higher structural and durable liquidity, moratorium on debt servicing, asset classification standstill, among others, Das said at an event.
"The measures taken by the RBI are intended to deal with the specific situation of Covid and cannot be permanent. Post containment of COVID-19, a very careful trajectory needs to be followed for orderly unwinding of the various counter-cyclical measures taken by the RBI and the financial sector should return to normal functioning without relying on the regulatory relaxations and other measures as the new norm," RBI Governor said.
RBI Governor further said that once some clarity reaches on the coronavirus curve and other aspects, the RBI will start giving its estimates on inflation and growth.
On the Prudential Framework for Resolution of Stressed Asset, RBI Governor said that it is a well thought out decision taken in consultation with stakeholders. He also said that the move is aimed at striking a balance between protecting the interest of depositors, maintaining financial stability, and preserving the economic value of viable businesses by providing durable relief to businesses as well as individuals affected by coronavirus pandemic. "We expect efficient and diligent implementation of the resolution plans by the banks, keeping the above objectives in mind," Das added.
Das also stressed upon the need to have strong risk management systems which should be able to "smell vulnerabilities in businesses in advance". "To state the obvious, the pandemic will put pressure on balance sheets of banks and lead to erosion of capital," Das added. An effective early warning system and forward-looking stress testing framework should be an integral part of the risk management framework of the banks, he said.
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