RBI has taken several measures to protect country’s financial system and support the economy amid coronavirus crisis, Governor Shaktikanta Das said on Saturday. Addressing the seventh SBI Banking & Economics Conclave, through a video call, he said that the top most priority for RBI is growth, while financial stability is equally important.
The outbreak of COVID-19 pandemic is unambiguously the worst health and economic crisis in the last 100 years during peace time with unprecedented negative consequences for output, jobs and well-being. It has dented the existing world order, global value chains, labour and capital movements across globe and needless to say, the socio-economic conditions of large section of world population, Das said.
“RBI has strengthened its offsite surveillance mechanism to identify emerging risks. RBI is engaged with all stakeholders for resolution for Punjab and Maharashtra Cooperative Bank,” Das said.
On RBI policy, he said that the action for medium-term will require a careful assessment of how the crisis unfolds. “Coronavirus pandemic will result in high NPAs and capital erosion. Building buffers, raising capital crucial for ensuring credit flows and to build resilience in financial system,” he said.
Keynote address by RBI Governor in SBI Conclave https://t.co/7HQJBV1cKj
— ReserveBankOfIndia (@RBI) July 11, 2020
He said that the pandemic is the worst health and economic crisis in 100 years with unprecedented negative consequences for output, jobs, and well being. “It dented the existing world order, global value chains, labour and capital movements across globe,” he said.
Talking about the economic impact of the pandemic, the governor said, Monetary policy was already in an accommodative mode before the outbreak of COVID-19, with a cumulative repo rate cut of 135 basis points between February 2019 and the onset of the pandemic. “Repo rate was cut mainly to tackle the slowdown in growth which was visible at that time. The MPC has decided, as you would be aware, to cumulatively, cut the Policy repo rate by 115 basis points. So from February 2019 the total rate cut that RBI has undertaken is 250 basis points.”
Indian economy has started showing signs of going back to normalcy after easing of restrictions, said Das. However, he stressed on the need for a structured mechanism with legal backing to deal with stressed assets.