Reserve Bank of India (RBI) governor Shaktikanta Das asked top executives of commercial banks to raise capital to help strengthen their lending capacity and proactively set aside money to cover loan losses.
“Most banks said that stress is under control,” a banker who attended the meeting said.
During the two-day meeting, governor Das, along with his deputy governors, discussed the economic situation with bank chiefs and emphasized the role of the banking sector in supporting the ongoing revival in economic activity. Das recounted the measures taken by RBI since the onset of the pandemic to stabilize the economy.
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Indian banks have been hit hard by the disruptions caused by the pandemic, which has crimped demand for loans and hurt borrowers’ ability to repay them.
Exposures to businesses worst affected by the lockdown such as real estate, transportation and unsecured retail loans may lead to a further deterioration in asset quality of the lenders.
Reserve Bank deputy governor in charge Michael Patra also made specific mention of the surplus liquidity situation and its impact on the earnings of the bank, said the banker, who declined to be named.
Das also discussed interest rate transmission and credit flow to different sectors and checked the progress in the implementation of a resolution framework for covid-related stressed assets.
He stressed on the need to strengthen and enhance the capacity and efficiency of the banks’ technology infrastructure and asked the top bank executives to pay strong focus on improving grievance redressal mechanisms.
Earlier this month, the Reserve Bank’s monetary policy committee had retained an accommodative policy stance.
In the minutes, the rate-setting panel expressed concerns about elevated inflation posing challenges for reviving economic growth.
The panel also admitted that growth is fragile even as it is showing signs of recovery.