Experts have been concerned with the economic crisis that the country is witnessing due to the ongoing coronavirus pandemic. India was already facing a slower growth rate compared to previous years and the virus outbreak further slowed down the growth but Reserve Bank of India (RBI) governor Shaktikanta Das gave a sense of relief when he said that the country’s banking system is ‘sound and stable’ even during the pandemic.
“We have not exhausted our ammunition, whether on rate cuts or other policy actions,” Das said. He added that being overly risk-averse is self-defeating for banks.
He expressed that the financial sector should be back to normalcy once the pandemic is over but for that, a trajectory has to be followed that has to be made with all the factors involved. Having said that, he maintained that these things take time, and by no means can the RBI release it any time soon. RBI will only be able to do so once there is clarity on the curve COVID-19.
There were regular meetings to decide on the interest rates and after a three day brian storming session with the Monetary Policy Committee, it was decided that the interest rates will be kept unchanged and banks have opted for the status quo.
The chief did not get into the complete details of the meetings but he made it clear that that though there is leverage for certain changes that can be made in the monetary action plan emphasized that the arsenal has to kept dry for it to be judiciously used for promoting growth which has been deeply impacted by the coronavirus crisis.
As far as the government’s response to dealing with the financial crunch is considered, he said that their steps have been very calculated, fiscally responsible, and prudent. And as for the problems that banks are facing, he said that what are the immediate steps taken by the bank and how they react to the situation is extremely important on how the bank performs. In order to be stable, they have work on increasing capital.
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