Mumbai: The Indian economy has started showing signs of normalcy with ease in lockdown restrictions across the country, RBI Governor Shaktikanta Das said. He added that post containment of COVID-19, a careful trajectory has to be followed in orderly unwinding of countercyclical regulatory measures.
The financial sector should return to normal functioning without relying on regulatory relaxation as the new norm, Das said at the 7th SBI Banking and Economics Conclave. While the multi-pronged approach of the Reserve Bank has provided a cushion from the immediate impact of the pandemic on banks, the medium-term outlook is uncertain and depends on the COVID-19 curve, he said.
“Policy action in medium-term would require a careful assessment of how the crisis unfolds,” he said, adding that building buffers and raising capital will be crucial not only to ensure credit flows but also to build resilience in the financial system.
®The economic impact of the pandemic due to the lockdown and anticipated post-lockdown compression in economic growth may result in higher non-performing assets and capital erosion of the banks, Das cautioned. A recapitalisation plan for public and private sector banks has therefore become absolutely necessary, he added.