MUMBAI : Reserve Bank of India governor Shaktikanta Das on Monday said that banks have to be prepared to face challenges in the wake of the outbreak of the corona virus. Speaking at the 13th edition of Mint Annual Banking conclave, Das added that a slowing global growth would add to the stress on the Indian corporate balancesheet and thereby on banks.
Quoting agencies such as International Monetary Fund, Das said that global growth is expected to further slowdown due to the impact of coronavirus. IMF has already reduced the global growth forecast for the current year to 2.9%. He added that banks should therefore be prepared to face these challenges with effective response.
“The impact of coronavirus, the IMF is analysing the impact of coronavirus on global growth which is on slowdown mode. If global growth slows down further, it will impact health of banks because slowing growth created more stress in the corporate sector. In this environment, banks should focus on prudent lending," he said.
Das also said that slowing domestic credit growth is another challenge and banks should therefore focus on credit off-take which has dropped to 7% in the recent months. He also cautioned that banks should be more prudent while lending and ensure the quality of appraisals is not overlooked. He also added that banks should focus on improving their operational efficiency.
“Banks should focus on credit offtake. They should focus on prudent lending and improving operational efficiency of banks. There cannot be any compromise on prudent lending, quality of appraisal. Quality of appraisal will flow out of good governance, good internal control system," he said.
With an aim to boost credit growth, RBI in its recent monetary policy in February announced exemption of cash reserve ratio for 5 years for incremental credit disbursed to automobiles, residential housing and micro, small and medium enterprises. The central bank has also introduced long-term repo operations (LTRO) of one- and three-year tenures to enhance liquidity, credit growth and transmission of policy rates to customers.
In his speech, Das also touched upon different steps that RBI is taking to improve supervision of banks. He said the central bank is looking at more sharper and forward-looking off-site surveillance framework as an aid to our on-site supervision. “We are also following a calibrated supervisory approach to bring in required modularity and scalability, to better focus on risky practices and institutions and to deploy an appropriate range of tools and technology to achieve our supervisory objectives," he said. “A Sup-tech initiative is being implemented as a part of the integrated compliance management and tracking system. This will facilitate transparent and efficient monitoring of all pending compliances of supervised entities through a web-based interface, automate the inspection planning process and cyber incident reporting, and ensure seamless collection of data. Thematic studies will be undertaken across banks and other financial sector entities. New elements of supervision will also be introduced from time to time," he added.
