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Corona worst economic and health crisis in 100 years: RBI Governor

by BQ News Bureau
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The corona pandemic is unambiguously the worst health and economic crisis in the last 100 years during peace time with unprecedented negative consequences for output, jobs and well-being, said Reserve Bank of India Governor Shaktikanta Das.

He was speaking at the 7th SBI Banking & Economics Conference on Saturday.

Corona had dented the existing world order, global value chains, labour and capital movements across globe and needless to say, the socio-economic conditions of large section of world population, he added.

“The corona pandemic, perhaps, represents so far the biggest test of the robustness and resilience of our economic and financial system. In the extraordinary circumstances that we face today, history could provide us with some useful guidance with respect to the role of central banks. The RBI has taken a number of important historic measures to protect our financial system and support the real economy in the current crisis,” he said.

Monetary policy was already in an accommodative mode before the outbreak, with a cumulative repo rate cut of 135 basis points between February 2019 and the onset of the pandemic. Reversing the slowdown in growth momentum was the key rationale for this distinct shift in the stance of monetary policy, he stated.

Consistent with this policy stance, liquidity conditions were also kept in ample surplus all through since June 2019. The lagged impact of these measures was about to propel a cyclical turnaround in economic activity when corona brought with it calamitous misery, endangering both life and livelihood of people.

On financial stability and developmental measures, he said that the financial system of the country was in a much improved position, owing to various regulatory and supervisory initiatives of the Reserve Bank. “We had put in place a framework for resolution of stressed assets in addition to implementing multiple measures to strengthen credit discipline and to reduce credit concentration.”

The RBI had strengthened its off-site surveillance mechanism to identify emerging risks and assess the vulnerabilities across the supervised entities for timely action. “We are also working towards strengthening the supervisory market intelligence capabilities, with the help of both ]personal and technological intelligence,” the RBI Governor added.

In case of the urban co-operative banks, special efforts were being made to move towards a risk-based and pro-active supervisory approach to identify weaknesses in their operations early. An early warning system with a stress-testing framework had been formed for timely recognition of weak banks for appropriate action.

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