Money & Banking

Banks must take some calculated risks to ensure economic recovery: Central Bank MD

Our Bureau Kolkata | Updated on July 30, 2020 Published on July 30, 2020

Pallav Mohapatra, MD and CEO, Central Bank of India   -  Emmanual Yogini

Banks should not be too risk-averse and should take judicious decision to lend based on available information.

According to Pallav Mohapatra, MD & CEO, Central Bank of India, banks should take some calculated risks to ensure economic recovery happens.

“Banks should not be risk averse. If we take some risk then we can ensure that economic recovery may happen but if we do not take any risk then the recovery or economic growth might not happen,” Mohapatra said at an e-conference on ‘Lending and Credit Risk’, organised by the Indian Chamber of Commerce on Thursday.

It is important that banks take action today and lend to genuine borrowers without which the possibility of a recovery might not happen.

Merely having surplus liquidity may not be enough to ensure the flow of funds to various sectors as banks need to maintain minimum regulatory capital requirement before they can lend to customers.

“There is a perception that banks are having huge liquidity but are risk averse but it should be understood that merely having liquidity is not enough to ensure that growth takes place. If the minimum capital requirement is not adhered to then even while you are sitting on enough liquidity you may not be able to give credit,” he said.

According to Rajesh Kumar, MD & CEO, TransUnion Cibil, there is a need to build trust in the ecosystem and bolster digital infrastructure in the MSME sector to address the issue of defaults.

Opening up

According to Rajiv Sabharwal, MD & CEO, Tata Capital, there is a need to start opening up public transport in measured quantities and ensure people can move around to kickstart economy.

“There is no certainty on end date of this (the virus and pandemic). So as of now we have to ensure that we start all activities taking necessary precautions.....we cannot hibernate,” he said.

As things start opening up businesses will start coming back to normal.

The industry might also need a one-time restructuring support to help tide over temporary crisis once things start opening up. This apart, the government would also have to work on a package to stimulate demand.

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Published on July 30, 2020
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