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RBI Governor Shaktikanta Das: Loan moratorium was temporary solution to reduce COVID-19 related

Date: 21-08-2020
Subject: RBI Governor Shaktikanta Das: Loan moratorium was temporary solution to reduce COVID-19 related
Reserve Bank of India (RBI) Governor Shaktikanta Das on August 21 said that the Central Bank has policy space and it's wrong to say that rate cuts are over. RBI has several conventional and unconventional policy tools which will be used judiciously to ensure its effectiveness, Das said.

In an interview with CNBC Awaaz, the RBI Governor said, "Uncertainty is the biggest challenge right now and a lot depends on COVID-19 vaccine. RBI is closely watching markets to ensure stability and the economy will recover soon after the COVID-19 curve flattens."

Speaking about the RBI Monetary Policy Committee (MPC) minutes released on August 20, Das said, "We look at many parameters while deciding monetary policy. The committee considers several factors like CPI, core CPI, WPI while deciding policy. RBI panel will review policy changes made in the last 5 years to improve MPC response in future."

As per the minutes of the Monetary Policy Committee (MPC) meet released on August 20, Das had said, "It is important to keep our arsenal dry and use it judiciously".

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Also read: RBI MPC Minutes | 'Important to keep our arsenal dry and use it judiciously': Shaktikanta Das

"I feel that we should wait for some more time for the cumulative 250 basis points reduction in policy rate since February 2019 to seep into the financial system and further reduce interest rates and spreads," Das had said.

When asked if bank moratorium will end on August 31, Das said that bank moratorium was a temporary solution to the coronavirus lockdown-related stress.

"RBI formed the "COVID-19-related resolution framework" after taking into consideration financial health of banks as well as depositors. Businesses are in a lot of stress due to COVID-19 and if they fail, it will lead to financial instability. However, if businesses are saved, they will replay loans and, subsequently, save jobs," he said.

"Bank moratorium was a temporary solution to respond to coronavirus lockdown but resolution framework is a permanent solution," he said, adding that resolution has replaced moratorium.

Asked if RBI has any measures to assist the real estate industry, which is among the one of the worst affected due to COVID-19, Das said that the government has already announced several measures for the industry.

Speaking about stressed banks and a need for a framework, Das said that RBI has increased supervision on banks in the last and-and-a-half years. "There have been a lot of improvements in regulatory and supervisory measures. We hope that with improved supervision no bank will need to be saved," he added.

Further, on the Central bank's proposal to cap the tenures of CEO, Das said that there are many reasons behind the proposal. "RBI is considering many suggestions on CEO tenure cap and a balanced and calibrated decision will be made after examining all," Das said.

The Reserve Bank of India on June 11 released a discussion paper on governance in commercial banks wherein it proposed tenure limits for promoters of banks to hold CEO or whole-time director positions.

According to the paper, a major shareholder/promoter may continue as CEO or whole-time director for 10 years. After the term ends, the individual must transition to professional management in the spirit of corporate governance.


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