RBI Guv Shaktikanta Das says Indian economy showing signs of returning to normalcy

Reserve Bank of India Governor Shaktikanta Das, the first to forecast  contraction in economic growth for 2020-21,says  “the Indian economy has started showing signs of getting back to normalcy in response to the staggered easing of restrictions.” The Indian economy has started showing signs of going back to normalcy after easing of restrictions of the lockdown protocols necessitated to contain Coronavirus, Shaktikanta Das said at the 7th SBI Banking and Economics Conclave. While the multi-pronged approach of the Reserve Bank had provided a cushion from the immediate impact of the pandemic on banks, the medium-term outlook is uncertain and depended on the Covid-19 curve, he said. building buffers and raising capital would be crucial not only to ensuring credit flows but also to building resilience in the financial system. The country’s banking and financial system is capable of rising to the occasion in meeting this challenge, he asserted. In these challenging times, banks had to improve their governance and sharpen their risk management, he said. Banks would also have to raise capital in an anticipatory basis instead of waiting for a situation to arise, Das added. In orderly unwinding of counter-cyclical regulatory measures, the financial sector should return to normal functioning without relying on regulatory relaxation as the new norm, “he said. he minimum capital requirements of banks, which are based on historical loss events, may no longer be considered sufficient enough to absorb the losses. “Meeting the minimum capital requirement is necessary, but not a sufficient condition for financial stability,” the RBI governor said as shocks to the financial system dubbed as ‘once in a lifetime events’ seem to be more frequent than even ‘once in a decade’. Such risk events, such the Covid crisis now, could be more frequent, varied and bigger risk events than in the past.