Delivering the 39th Palkhivala Memorial Lecture, the governor stated the principal goal throughout the pandemic interval was to help financial exercise; and looking out again, it’s evident that insurance policies of the RBI have helped in easing the severity of the financial impression of the pandemic.
“I want to unambiguously reiterate that the Reserve Financial institution stays steadfast to take any additional measures, as could also be mandatory, whereas on the identical time remaining totally dedicated to sustaining monetary stability,” he stated.
In a bid to take care of monetary stability, Das emphasised the necessity for banks to boost assets upfront as a buffer.
Going forward, he stated, monetary establishments in India should stroll a tightrope in nurturing the financial restoration inside the overarching goal of preserving long-term stability of the monetary system.
The present COVID-19 pandemic associated shock will place higher strain on the stability sheets of banks by way of non-performing assets, resulting in erosion of capital, he stated, including constructing buffers and elevating capital by banks – each in the private and non-private sector – might be essential not solely to make sure credit score stream but additionally to construct resilience within the monetary system.
“We’ve got suggested all banks, massive non-deposit taking NBFCs and all deposit-taking NBFCs to evaluate the impression of COVID-19 on their stability sheet, asset high quality, liquidity, capital adequacy, and work out potential mitigation measures, together with capital planning, capital elevating, and contingency liquidity planning, amongst others,” he stated.
Prudently, just a few massive public sector banks (PSBs) and main non-public sector banks (PVBs) have already raised capital, and a few have plans to boost additional assets making the most of benign monetary situations.
“This course of must be placed on the quick observe,” he added.
The governor stated current expertise throughout nations throughout the pandemic counsel that banks, non-banks, monetary markets and cost methods stay on the core of monetary stability points, there was a must work a lot nearer on the system in its entirety.
“On this sense, the general goal of monetary stability insurance policies must be carefully intertwined with the well being of the actual economic system,” he famous.
The monetary stability must be seen in a broader perspective and should embrace not simply the steadiness of the monetary system and worth stability but additionally ‘fiscal sustainability and exterior sector viability’, Das stated.
Noting that good governance must be supported by efficient threat administration features and assurance mechanisms, he stated banks and non-banking finance establishments must establish dangers early, monitor them carefully and handle them successfully.
“The danger administration operate in banks and NBFCs ought to evolve with altering occasions as know-how turns into all-pervasive and must be in sync with worldwide greatest practices. On this context, instilling an applicable threat tradition within the organisation is necessary,” he stated.
A strong assurance mechanism by the use of inner audit operate was one other necessary element of sound corporate governance and threat administration, Das stated, including it supplies impartial analysis and assurance to the Board that the “operations had been carried out in accordance with set insurance policies and procedures”.
He stated the central financial institution has already taken plenty of measures and would proceed to take action.
“Current efforts on this path had been geared in direction of enhancing the position and stature of compliance and inner audit features in banks by clarifying supervisor expectations and aligning the rules with greatest practices.
“Some extra measures on bettering governance in banks and NBFCs are within the pipeline,” he stated.