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.

Key Highlights

• 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.