RBI Financial Stability Report: Shaktikanta Das Focuses On Stability Post-Pandemic
The Reserve Bank of India has emphasised on the need to maintain financial sector stability in a post-pandemic environment, even as it cautioned that extreme risk aversion could hinder recovery.
The challenges that lie ahead must be addressed to preserve long-term stability of the financial system, Governor Shaktikanta Das said in the RBI’s biannual Financial Stability Report. He said business models would need to be reassessed after Covid-19.
Once we enter the post-pandemic phase, the focus would be on calibrated unwinding of regulatory and other dispensations, provided to financial institutions. Financial intermediaries will have to undertake reappraisal of their business models.Shaktikanta Das, Governor, RBI
- The pandemic hit India in a period of growth moderation. The ensuing disruptions in demand conditions and supply chains have been aggravated by global spillovers. However, of late, signs of a gradual recovery from the nationwide lockdown are becoming visible.
- The coordinated efforts by governments, central banks and agencies have stabilised the financial system and markets. However, the outlook remains highly uncertain.
- There’s a growing disconnect between movements in certain segments of financial markets and real sector activity.
- Asset markets have to adapt to a new normal in a non-disruptive manner.
- Though the financial system in India remains sound, in the current environment, need for financial intermediaries to proactively augment capital and improve their resilience has acquired top priority.
- Contagion risks warrant constant vigilance by all stakeholders in the financial system.
- While risk management has to be prudent, extreme risk aversion would have adverse outcomes for all.
Financial sector stability is a prerequisite for giving confidence to businesses, investors and consumers, Das said, reiterating the need to remain watchful and focused.