Money & Banking

Take proactive mitigating measures, RBI tells banks amid global uncertainty

BL Mumbai Bureau | Updated on: May 18, 2022
The advisory comes even as the RBI’s latest monetary policy report noted that the fallout of the Ukraine-Russia conflict has overcast the near-term outlook with heightened uncertainties

The advisory comes even as the RBI’s latest monetary policy report noted that the fallout of the Ukraine-Russia conflict has overcast the near-term outlook with heightened uncertainties | Photo Credit: FRANCIS MASCARENHAS

Advisory says banks could even consider raising capital to ensure minimal impact on balancesheets

Reserve Bank of India (RBI) Governor Shaktikanta Das has advised banks to remain watchful of the recent geopolitical developments and proactively take mitigating measures, including raising capital to ensure a minimised impact on their balance sheets.

The advisory comes even as the RBI’s latest monetary policy report noted that the fallout of the Ukraine-Russia conflict has overcast the near-term outlook with heightened uncertainties, just when the economic activity was recovering from the ebbing of the Omicron wave.

‘Positive effects ephemeral’

“Growth and inflation outcomes are at high risk across the world as well as in India. In the face of this extraordinary risk, the positive effects expected from the release of pent-up demand, especially for contact-intensive services, the government’s thrust on infrastructure and capital expenditure, congenial financial conditions and improving capacity utilisation, appear ephemeral,” the report said.

In his foreword to the last financial stability report (December 2021), Das had underscored that financial institutions in India have remained resilient amid the pandemic, and stability prevails in the financial markets, cushioned by policy and regulatory support. “Balance sheets of banks remain strong and capital and liquidity buffers are being bolstered to mitigate future shocks,” Das had said.

Supporting economic revival

The Governor, in a meeting with the chiefs of select public and private sector banks on May 17 and 18, urged them to pay specific attention to further improve their grievance redress systems and continue to provide necessary support to the ongoing revival of economic activity.

Among other matters, issues relating to credit off-take, outlook on asset quality, collection efficiency, consumer grievance redress, setting up of digital banking units, resilience of IT infrastructure and cyber security defences in banks, etc. were also discussed, RBI said in a statement.

At the meeting, which was also attended by Deputy Governors MK Jain and M Rajeshwar Rao, along with a few senior officials of the RBI, the Governor noted the key role played by the banks in supporting the economy throughout the pandemic.

Published on May 18, 2022
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