Reserve Bank of India Governor Shaktikanta Das has asked citizens not to link the safety of their deposits with the volatility of the stock market. At a press conference on Friday morning, the RBI chief said that there has been panic withdrawal from private banks after the coronavirus pandemic impacted share prices of banks. "The Indian banking system is safe and sound," he said.
"In the recent past, COVID-19 related volatility in the stock market has impacted share prices of banks as well resulting in some panic withdrawal of deposits from a few private sector banks. It would be fallacious to link share prices to safety of deposits," he emphasised.
The RBI Governor said that depositors of commercial banks, including private sector banks, need not worry on the safety of their funds. "I would, therefore, urge members of the public as well as various public authorities who have deposits in private sector banks not to resort to any panic withdrawal of their funds.Their funds are safe," said Shaktikanta Das.
This statement comes weeks after the moratorium on troubled Yes Bank was lifted by the RBI, following a reconstruction scheme. The RBI has announced a withdrawal cap on Yes Bank on March 5, following which customers were allowed to withdraw only Rs 50,000 for a month. The apex bank also superseded the board of Yes Bank. The moratorium was lifted on March 18.
Governor Das also slashed repo rate by 75 bps to 4.4 per cent and reverse repo rate by 90 bps to 4 per cent. He said that the reverse repo rate has been decreased by 90 basis point to make it unattractive for banks to park money with RBI.
The Governor said that these are extraordinary times. However he said that he was still optimistic. "In spite of the very challenging environment, I remain optimistic," he added. He said that the macro-economic fundamentals of the Indian economy are sound and stronger than what they were in the aftermath of the global financial crisis of 2008-09.