RBI points at Omicron rise, rising inflation pressure as major challenges
Premium- The report released by RBI said that economy has steadily gained momentum and remained resilient since the second quarter of the current fiscal.
MUMBAI : The Reserve Bank of India in its second financial stability report flagged the Omicron variant of coronavirus as major challenge for the economic recovery.
The first and second wave of coronavirus along with the subsequent lockdown dealt a heavy blow to the economy of the country.
RBI's report also points at the rising inflation pressures as an obstacle for the economic growth.
The report also said that economy has steadily gained momentum and remained resilient since the second quarter of the current fiscal.
In the foreword to the report, RBI Governor Shaktikanta Das noted that after the destructive second wave in April-May 2021, the growth outlook has progressively improved, though there are headwinds from global developments and more recently from the Omicron virus.
A stronger and sustainable recovery hinges on the revival of private investment and shoring up private consumption, which unfortunately still remain below their pre-pandemic levels, he notes.
Admitting that inflation remains a concern as it is by the build-up of cost-push pressures, Das has called for stronger supply-side measures to contain food and energy prices.
Noting that the financial institutions have remained resilient amidst the pandemic and stability prevails in the financial markets cushioned by policy and regulatory support, the governor is confident that the strong balance sheets of banks with higher capital and liquidity buffers will help mitigate future shocks.
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On the domestic front, progress in vaccination has enabled the recovery to regain traction after the debilitating second wave of the pandemic, notwithstanding signs of slowing pace more recently; the corporate sector is gaining strength and bank credit growth is improving, said the RBI report.
Quoting the stress tests on banks, the governor has also warned that gross NPAs may jump to 8.1-9.5% by September 2022 from 6.9% in September 2021.
The governor concluded by reiterating the Reserve Bank's resolute commitment to ensure a robust and efficient financial system that supports strong, sustainable and inclusive growth with macroeconomic and financial stability.
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