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Economy showing signs of getting back to normalcy: RBI governor – Times of India

MUMBAI: RBI governor Shaktikanta Das has said that the economy is showing signs of getting back to normalcy in response to the staggered easing of restrictions and that the policy measures by RBI appear to have worked so far.
Despite the easing, the governor said that it was uncertain when supply chains will be restored fully; how long will it take for demand conditions to normalise; and what kind of durable effects the pandemic will leave behind on our potential growth. He was speaking at the 7th SBI Banking & Economics Conclave organised online.
Das also urged private and public sector lenders to raise more capital stating that recapitalization of public and private sector banks is `absolutely necessary’ as bad loans could rise because of compression in growth.
Highlighting the policy measures taken by RBI, Das said that central bank has released additional liquidity to the tune of Rs 9.57 lakh crore (equivalent to about 4.7% of nominal GDP) since February 2020. But these countercyclical measures were not going to be permanent. “Post containment of COVID-19, a very careful trajectory has to be followed in orderly unwinding of counter-cyclical regulatory measures and the financial sector should return to normal functioning without relying on the regulatory relaxations as the new norm,” said Das.
The governor said that banks were in a better shape on March 20 compared to the previous year. The gross non-performing asset (NPA) ratio and net NPA ratio of all banks together stood at 8.3% and 2.9% in March 2020, compared to 9.1% and 3.7% as on March 2019, respectively. The capital adequacy ratio for scheduled commercial banks (SCBs) rose to 14.8% in March 2020 from 14.3% last year. For PSU banks the ratio improved from 12.2% to 13%.
However, this was not enough as once in hundred-year risk events were now taking place more than once a decade, he said. “To paraphrase Oscar Wilde, being caught unprepared in the face of a shock may be regarded as a misfortune, but to be caught unawares more than once may be a sign of carelessness,” said Das.
Highlighting the need to separate bank ownership from management, Das said that while owners focus on the return on their investment, the management should focus on protecting the interest of all stakeholders. He added that the RBI will be extending its good governance practice of separating ownership from management to non-banking finance companies as well.
In Video:RBI has taken measures to protect India’s financial system, support real economy in current crisis: Shaktikanta Das