RBI Governor Shaktikanta Das advised banks to ensure continuity in the provision of financial services, including credit facilities, to individuals and businesses in the face of the challenges brought on by the pandemic.
Reserve Bank of India (RBI) Governor Shaktikanta Das on May 25 told chiefs of select private banks to boost credit flows to retail and business borrowers. He also called on them to implement the measures announced by the central bank on May 5.
The governor spoke to them via video conference in a meeting attended by deputy governors MK Jain, M Rajeshwar Rao, Michael D. Patra and T Rabi Sankar. Earlier, on May 19, the RBI top brass had held a similar meeting with top executives of public sector banks.
“In his opening remarks, the governor recognised the crucial role played by the private sector banks as important stakeholders in the Indian banking sector. He impressed upon the banks to quickly and swiftly implement the measures announced by RBI on May 5, 2021, in right earnest,” the RBI said in a statement on its website.
On May 5, the RBI governor had announced a slew of measures to counter the impact of the second wave of the COVID-19 pandemic on banks and financial institutions as also their borrowers. These included a term liquidity facility of Rs 50,000 crore for ramping up emergency health services, a fresh resolution framework for COVID-related stressed assets, and a relaxation in the overdraft facility for state governments.
In Tuesday’s meeting, Das advised the banks to ensure continuity in the provision of financial services, including credit facilities, to individuals and businesses in the face of the challenges brought on by the pandemic. At the same time, he urged them to continue to further strengthen their balance sheets proactively. On May 5, the RBI had also allowed banks to utilise 100 percent of floating provisions and countercyclical provisioning buffer held by them as on December 31, 2020, for making specific provisions for bad loans. Banks will be able to avail of this benefit with immediate effect and up to March 31, 2022. The measure was aimed at enabling capital conservation by lenders.
Das discussed the current economic situation and the state of the banking sector in Tuesday’s meeting. Credit flows to small borrowers and micro, small and medium enterprises (MSMEs) and progress in the implementation of COVID Resolution Framework 1.0, announced in August 2020, were also discussed.
The governor also spoke to banks on the question of monetary policy transmission and the liquidity scenario. The monetary policy committee has cut rates by 250 basis points (bps) since February 2019 to support growth. One bps is one-hundredth of a percentage point.