Ambani insolvency move stayed by HC
Banks need to reorient business, lend more
New Delhi: The Delhi high court has put on hold the insolvency resolution process proceedings against Reliance Communications then Chairman Anil Ambani in relation to recovery of ` 1,200 crore loans given by SBI to his two firms.
Reserve Bank of India ( RBI) governor Shaktikanta Das on Thursday said the central bank is yet to exhaust all options and added that it would not unwind the recent measures taken to support the Covid- 19 hit economy. Hinting that it could announce more policy measures, including rates cut if required, to support the economy, Das said, “We have not exhausted our ammunition, whether on rate cuts or other policy actions. We are constantly watchful and as and when we anticipate certain emerging situation, we'll deal with it.”
He warned banks that being overly risk- averse would be "self- defeating" and that lenders will not be able to “win their bread” if they do not carry out their basic task. Rather than becoming averse to lending, banks have to improve their risk management and governance frameworks, and also build sufficient resilience, Das said.
On a question whether the RBI, which cut policy rates in two moves since the onset of the pandemic, front- loaded its calls and what is it left with to tackle further impact, Das said, “We have not exhausted our policy options, whether it relates to rate cuts or any other aspects of central banking. We have not exhausted our instruments or ammunition.”
Das that the RBI wanted to keep its gun powder dry and hence opted for a status quo at the last policy review earlier this month.
Speaking at a webinar, Das said, "The measures taken by the RBI are intended to deal with the specific situation of Covid and cannot be permanent. Post- containment of Covid- 19, a very careful trajectory needs to be followed for orderly unwinding of the various counter- cyclical measures taken by the RBI and the financial sector should return to normal functioning without relying on the regulatory relaxations and other measures as the new norm," the governor said.
He further said that once some clarity reaches on the coronavirus curve and other aspects, the RBI will start giving its estimates on inflation and growth. The headline Consumer Price Index ( CPI) for June 2020 came higher than consensus expectations and was at 6.1 per cent year- onyear, after reaching 7.2 per cent in April and 6.3 per cent in May. Real rates, which have been a driver of inflation in the past, are moving towards the negative terrain after six long years.
Since February, the RBI has reduced rates by 1.15 per cent in two rate cut moves till the inflation continued to surge to beyond its comfort level. However, the policy continues to be within the accommodation stance, which means the central bank can act as and when it sees space.
Speaking about hardening of yields on government securities of late, Das said it will be incorrect to say that the RBI’s moves have not worked. He said the bond yields have hardened only in the last fortnight.
Das said that the banking system needs to reorient business in the post- coronavirus world by looking within and added that the banking system in India is resilient enough now.