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RBI has taken steps to smoothen impact of second COVID wave, says Deputy Governor M K Jain

Talking about the link between financial system and climate resilience, Jain said while insurance companies directly face the climate risk, banks are also required to take into account such risks more seriously.

June 18, 2021 / 10:08 PM IST
RBI

RBI

Asserting that the second wave of COVID-19 has posed some challenges, RBI Deputy Governor M K Jain on Friday said both the central bank and the government have taken steps to mitigate its impact.

He also said the domestic banking system is strong, as per the preliminary data for the quarter ended March 2021.

"I am happy to inform that the banking sector was in strong position when COVID-19 hit...the preliminary data suggest that in terms of CRAR that has been improved upon, the profitability has been improved upon, provision coverage ratio that has also been improved over the previous year, and the gross NPA as well as net NPA has come down," he said.

Jain was addressing a virtual conference organised by the India International Centre (IIC) and Research & Information System for Developing Countries (RIS).

Observing that the COVID-19 second wave has some challenging aspects, he said both the RBI and the government are dealing with this and taking steps to smoothen the impact on the financial system.

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COVID-19 Vaccine

Frequently Asked Questions

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How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

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The central bank has announced a slew of measures in the last two months to help flow of credit to the desired sectors and maintain adequate level of liquidity in the system.

Earlier this month, RBI kept its benchmark interest rate unchanged in view of elevated level of retail inflation.

Jain said the RBI strives to ensure financial resilience of banks and NBFCs by prescribing a set of micro prudential norms like minimum capital requirements.

To maintain resilience, he said, the RBI has asked financial entities to undertake stress tests at regular intervals and accordingly take risk mitigation measures.

Jain further said the financial system, both in India and overseas, is witnessing rapid shifts in the operating environment due to changing competitive landscape, automation and increasing regulatory supervisory expectations.

The Reserve Bank of India has put in place various regulations to improve the governance in banks and make them more resilient, he emphasised.

"In addition, banks have also made improvements in the risk management capacities. Yet, the changing operating and risk environment requires banks to be vigilant, strong and agile so as to identify risks early and absorb the shocks and be able to adapt to the newer ground realities.

"I am hopeful that banks and other financial institutions in India will rise to the challenge, continue to demonstrate the resilience and be able to contribute to a USD 5 trillion economy and beyond," he said.

Talking about the link between financial system and climate resilience, Jain said while insurance companies directly face the climate risk, banks are also required to take into account such risks more seriously.

In addition to mitigating operational risk arising out of climate extremes, he said there is a need for the financial system to move towards green financing, keeping in mind the development requirement of the country.

"While as of now RBI has not come out with any regulatory prescriptions, but we are evaluating all those aspects and then at the appropriate time after evaluating all the things a call may be taken," he said.
PTI
first published: Jun 18, 2021 10:07 pm

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