The coronavirus pandemic will worsen India's bad loan problem and result in capital erosion, RBI Governor Shaktikanta Das said on Saturday. However, he assured that the RBI is leaving no stone unturned to protect the country's financial system and support the economy amid the coronavirus crisis. "RBI policy action for medium-term will require a careful assessment of how the crisis unfolds. RBI has strengthened its off site surveillance mechanism to identify emerging risks," the governor said during the seventh SBI Banking & Economics Conclave, through a video conference.
The topmost priority for RBI is growth; financial stability is equally important, Das said. "We need a structured mechanism with legal backing to deal with stressed assets. Indian companies and industries respond better in a crisis. Indian economy has started showing signs of going back to normalcy after easing of restrictions. Building buffers, raising capital crucial for ensuring credit flows and to build resilience in the financial system," he said.
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 the globe," he said.
Talking about the economic impact of the pandemic, the governor said, "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."
With regard to the PMC Bank scam, the RBI governor said that the central bank was engaged with all stakeholders for resolution.
