Reserve Bank of India (RBI) Governor Shaktikanta Das delivered a keynote address at ‘Unlock BFSI 2.0’ on August 27.
Here's what the RBI Governor said:
> The RBI "will not unwind any measures immediately".
> "We are monitoring the situation and we will have a very cautious exit plan. The RBI is taking a long-term view on resolutions and measures."
> The COVID-19 pandemic continues to keep the world on the edge and the world is struggling to find a vaccine, Das said. "The spread continues unabated in India, but the fatality rate is much lower here. The economic impact is hard to measure."
> "Framework for COVID-related resolutions is well thought of and has been taken after due consultations," Das asserted.
> Das said that the central bank’s response to COVID-19 is unprecedented and that a “very calibrated and cautious plan (for the economy) is needed post-COVID-19”.
> "The banking landscape has changed a lot in recent years. But overall, India’s banking sector continues to be sound and stable. Today, the banks need to look at sunrise sectors while supporting those sectors which have the potential to bounce back," Das said.
> Das said that risk-management systems should be able to “smell vulnerabilities in businesses in advance”. “To state the obvious, the pandemic will put pressure on balance sheets of banks and lead to erosion of capital,” Das added.
> “What is more important is how banks proactively respond to this challenge. The RBI has already asked banks and NBFCs to do a COVID stress test. A battle is won by those who are firmly resolved to win,” Das said.
> The RBI Governor expressed “deep appreciation” for officers and staff of the banks who “helped maintain operational continuity” during the lockdown. “Must compliment banks for maintaining operational continuity despite challenging times,” he said.
From the fireside chat
> “There is never a dull moment in Central Bank and more so in times like this. The times are really uncertain and the situation keeps changing fast. There is no certainty that any growth projections will not change in a month,” Das said during a fireside chat following his keynote address.
> Das said that the "RBI does not have the luxury to give one number (estimate) today and change it a month down the line. Once there is some amount of clarity about the COVID-19 curve and other aspects around the pandemic, the RBI will certainly start giving the growth numbers."
> The central bank governor said that the RBI has not exhausted its ammunition on rate cuts or policy actions. He added that the monetary policy stance will continue to be accommodative.
> Debt-to-Gross Domestic Product (GDP) ratio, fiscal deficit and current account deficit were under “much better control this time,” Das said, adding that bond yields shot up only in last couple of weeks.
Leading up to the address
The RBI Monetary Policy Committee (MPC) had left the repo rate unchanged at 4 percent and reverse repo rate at 3.35 percent in its August meeting. Since February 2019, the MPC has cut repo rate by a steep 250 basis points. One bps is one hundredth of a percentage point.
Minutes of the RBI MPC meeting held earlier this month, reveal that all six members of the rate-setting panel - including the governor, had voted for a pause.
The address came days after Das, in an interview with CNBC Awaaz, said India’s stock market is not in sync with the real economy which will result in a correction. The reserve bank governor sounded cautious, but did not say when is the correction was expected.Meanwhile, it its annual report, the central bank has said that regulatory dispensations that the novel coronavirus pandemic has necessitated in terms of the moratorium on loan instalments, deferment of interest payments and restructuring, may have implications for the financial health of banks, unless they are closely monitored and judiciously used.