Virus A Threat To Financial System As Impact, Recovery Uncertain, Says Panel

The coronavirus poses a ‘serious’ threat to the stability of global financial system as both its impact and time of recovery are uncertain, according to the Financial Stability and Development Council chaired by Finance Minister Nirmala Sitharaman.

The council, comprising financial market regulators and heads of a few government departments, met on Thursday to review India’s macroeconomic situation at a time when economists see the economy contracting as a result of the pandemic.

The government and regulators need to “keep a continuous vigil” on the financial conditions—that could expose vulnerabilities in medium to long term—even as the monetary and fiscal policy actions announced have stabilised investor sentiment in the short run, said a statement from Ministry of Finance.

The government has announced a series of fiscal measures that involve cash and food handouts while India’s Monetary Policy Committee has sharply cut interest rates twice. And the Reserve Bank of India has taken steps to boost liquidity in the system.

“The efforts of the government and regulators are focused on avoiding a prolonged period of dislocation in financial markets,” the statement said.

The meeting—attended by RBI Governor Shaktikanta Das, SEBI Chairman Ajay Tyagi, IRDAI Chairman Subhash Chandra Khuntia and Finance Secretary Ajay Bhushan Pandey, among others—also reviewed major issues likely to be faced by banks and other financial institutions and regulatory and policy responses.

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Liquidity and solvency of non-bank lenders, market volatility, domestic resource mobilisation and capital flow issues were also discussed, the statement said.