RBI Governor calls COVID-19 Worst Health, Economic Crisis In Last 100 Years

RBI Governor Shaktikanta Das (file image)

RBI governor Shaktikanta Das has called COVID-19 pandemic as the worst health and economic crisis in the last 100 years during peace time with unprecedented negative consequences for output, jobs and well-being. He said corona outbreak represents so-far the biggest test of the robustness and resilience of our economic and financial system.

Flexing monetary muscle

He was speaking at the 7th SBI Banking & Economics Conclave. Mr. Das said the RBI has taken strong measures on both monetary and liquidity side to cushion the impact of the severe corona induced slowdown on the economy. These included cutting interest rates with the RBI’s benchmark repo rate seeing a cumulative drop of 250 bps since February 2019. The RBI also announced liquidity measures since February 2020 which aggregate to about ₹9.57 lakh crore (equivalent to about 4.7 per cent of 2019-20 nominal GDP).

Bank recapitalisation now necessary

He also underlined the challenges the economy faces. He said the economic impact of the pandemic – due to lock-down and anticipated post lock-down compression in economic growth – may result in higher non-performing assets and capital erosion of banks. A recapitalisation plan for PSBs and private banks (PVBs) has, therefore, become necessary. While the NBFC sector as a whole may still look resilient, the redemption pressure on NBFCs and mutual funds need close monitoring.

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