Is coronavirus really affecting banks?
Reserve Bank of India governor Shaktikanta Das speaking at the 13th edition of Mint’s Annual Banking Conclave advised the banks to be prepared for the challenges arising due to the Coronavirus outbreak, as a slowing global growth would add to the stress on the Indian corporate balance sheet and thereby on banks. He said that the banks should focus on credit off-take as the slowing domestic credit growth is a big challenge in itself. He mentioned the names of various agencies like the International Monetary Fund (IMF) to emphasize the expected slowdown of the global economy due to the virus outbreak. The IMF has already reduced their Global Growth Rate from 2.9 in 2019 to 3.3 in 2020 and he warned the banks to prepare for the incoming challenges with this.
Here’s what RBI Governor said about Coronavirus affecting banks:
“The IMF is analyzing the impact of the coronavirus on global growth, which is on a slowdown mode. If global growth slows down further, it will impact the health of banks because slowing growth creates more stress in the corporate sector. In this environment, banks should focus on prudent lending.” he said.
According to Das, banks should chief place on credit off-take which has already dropped by 7% in near in time months while the kept by a credit growth slowdown is yet another question that the banks will have to face.
For making stronger the credit growth, in the near in time money-related agreement of February, the RBI announced the let-off of money kept back relation for five years for through increasing steps credit gave out in payment to the automobile and of private houses housing parts as well as different undertakings. in the long run repo operations of one- and three-year having use of the property has also been introduced by the RBI to give greater value to ready-money for making payments, credit growth, and sending (power and so on) of agreement rates to persons getting support or goods.
He briefly talked about the different steps that the RBI is taking for increased supervision of the banks.
The governor added while closing the speech that:
“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 a 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.”