Indian economy returning to normalcy after an ease in lockdown: RBI Governor

RBI Governor Shaktikant Das
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RBI Governor Shaktikant Das 

Highlights

RBI Governor Shaktikant Das said, that Indian economy is returning to normalcy after the ease in lockdown in the country

RBI Governor Shaktikant Das said, that Indian economy is returning to normalcy after the ease in lockdown in the country. He was addressing the 7th SBI Banking and Economics Conclave today.

He said that COVID-19 was the worst health and economic crisis in the last 100 years with unprecedented negative consequences for output, jobs & well-being. But after the ease in lockdown there are signs of improvement in the economy, he said.

Mr Das said the central bank was prioritising both growth and financial stability and has taken several measures to protect the financial system and support the economy during the current crisis.

He said that post containment of COVID-19, a very careful trajectory has to be followed in the orderly unwinding of counter-cyclical regulatory measures. The financial sector should return to normal functioning without relying on regulatory relaxation as the new norm.

Mr Das added that Multi-pronged approach of the apex bank has provided a cushion from the immediate impact of the pandemic on the banks. He also cautioned that the medium-term outlook is uncertain and depends on the Covid-19 curve.

"Policy action in medium-term would require a careful assessment of how the crisis unfolds," he said adding that building buffers and raising capital will be crucial not only to ensure credit flows but also to build resilience in the financial system. The country's banking and financial system is capable of rising to the occasion in meeting this challenge. To this, he added, the bank, in these challenging times, will have to improve their governance and sharpen their risk management. They will also have to raise capital on an anticipatory basis instead of waiting for a situation to arise.

At the same time, Mr Das cautioned that the economic impact of the pandemic due to the lockdown and anticipated post-lockdown compression in economic growth may result in higher non-performing assets and capital erosion of the banks. He added a recapitalisation plan for public and private sector banks has, therefore, become absolutely necessary.

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