India’s financial system sound: RBI Governor

Releasing its Financial Stability Report, Reserve Bank of India (RBI) Governor Shaktikanta Das said, “the country’s financial system is sound but the need of the hour is to remain extremely watchful and focused.”

Das has asked banks to desist from extreme risk aversion during COVID-19 pandemic. In his foreword to the bi-annual Financial Stability Report, Das said, the top priority right now for banks and financial intermediaries should be for augmenting capital levels and to improve resilience.

Das said, the country’s financial system is sound but the need of the hour is to remain extremely watchful and focussed. He said governments, central banks and other public agencies across countries have made coordinated efforts to alleviate financial stress and build confidence among businesses, investors and consumers.

While maintaining that outlook for the financial system and markets remains highly uncertain, the Governor, however, added that signs of gradual recovery from the nationwide lockdown are visible.

Making it clear that there is no room for complacency on cyber security, Das said, IT platforms that have worked well in times of social distancing need to consolidate the gains in the post-pandemic period.

Meanwhile, RBI’s financial stability report has said that gross non-performing assets of banks may jump from 8.5 per cent in March 2020 to 12.5 per cent by March 2021 under the baseline scenario.

The report underlines that, a combination of fiscal, monetary and regulatory interventions in response to COVID-19, has ensured normal functioning of financial markets. It adds that simmering global geopolitical tensions and economic losses on account of the pandemic are major downside risks to global economic prospects.

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