Focus on long-term stability, says Das
MUMBAI: India’s financial system remains strong but extreme risk aversion could turn out to be counterproductive in the current scenario, Reserve Bank of India governor Shaktikanta Das said.
In his foreword to the central bank’s bi-annual Financial Stability Report (FSR) released on Friday, Das said financial intermediaries like banks and other financial institutions should augment capital and improve resilience as a top priority.
Preserving long-term financial stability is critical to ensure recovery from the pandemic, Das said, adding that post-pandemic, the focus would be on “calibrated unwinding of regulatory and other dispensations.”
“Financial sector stability is a prerequisite for giving confidence to businesses, investors and consumers. We need to remain extremely watchful and focused,” Das said in the foreword. Financial intermediaries will have to reappraise their business models and asset markets must adapt to a new normal in a non-disruptive manner, the governor said. He warned that contagion risks call for constant vigilance by all stakeholders in the financial system. He said the RBI report coincides with a growing disconnect between movements in certain segments of financial markets and real sector activity.