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Rewinding COVID-related relaxations in a timely manner a challenge, says RBI report

The RBI announced a series of significant liquidity infusion measures and other regulatory relaxations in the wake of Covid-19 to help banks.

December 29, 2020 / 06:15 PM IST
The Reserve Bank of India (RBI) on December 9 proposed draft rules for NBFCs to declare dividend.

The Reserve Bank of India (RBI) on December 9 proposed draft rules for NBFCs to declare dividend.

The Reserve Bank of India (RBI) on December 29 said rewinding various relaxations given in the wake of COVID-19 is a challenge, adding that banking sector health going ahead will depend on pace and shape of economic recovery.

“The challenge is to rewind various relaxations in a timely manner, reining in loan impairment and adequate capital infusion for a healthy banking sector,” said the RBI in its Trend and Progress report released on Tuesday.

To counter the COVID impact, the RBI announced total liquidity measures worth Rs 12.7 lakh crore through multiple channels. These included targeted long-term repo operations (TLTRO), a cumulative 115 bps rate cut, special open market operations (OMOs), a six-month moratorium on all term-loans and reduction in liquidity coverage ratio (LCR) requirement for SCBs from 100 percent to 80 percent.

This is an annual report that gives key insights into the health of commercial banks, NBFCs and co-operative banks.

In the wake of the pandemic, the RBI’s actions veered towards providing a stimulus to the economy while ensuring financial stability, the RBI report said. “The troika of policy rate cuts and liquidity infusion; regulatory forbearance; and time-bound resolution with additional provisions was employed to ease immediate concerns emanating from the pandemic as well as aid the economic revival going forward,” the report said.
Moneycontrol News
first published: Dec 29, 2020 06:15 pm

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