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RBI Governor tells banks that regulatory easing cannot be 'permanent' — only meant to deal with COVID-19

RBI Governor tells banks that regulatory easing cannot be 'permanent' — only meant to deal with COVID-19
Finance2 min read
Reserve Bank of India (RBI) Governor Shaktikanta Das on Thursday said that after containment of spread of the novel Coronavirus, the financial sector will have to return to its normal operations on their own and without regulatory relaxations.

Addressing an online event, Das described the RBI's response to the situation arising out of the pandemic as "unprecedented" and said that the measures taken by the central bank are intended to deal with the specific situation of Covid and it 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," he said.

Calling for reforms in the banking sector, Das said that despite several reforms in the banking sector since its nationalisation, lot more needs to be done.

He was of the view that with change in time, the nature of reforms needs to be reconfigured.

"The current steps towards consolidation of public sector banks in line with the Narasimham Committee recommendation is a step in the right direction. Indian banks this way can reap the benefits of scale, and become partners in the newer business opportunities across the globe," said the RBI Governor.

Larger and more efficient banks, both in public and private sectors, can compete shoulder to shoulder with the global banks to get a decent space in the global value chains, he added.

He noted that in recent years, the business landscape of banks has undergone significant change and now banks need to look out for "sunrise" sectors while supporting those which have the potential to bounce back, citing the example of prospective business opportunities in the rural sector which remain unexplored despite efforts to support it.

"They need to look at start-ups, renewables, logistics, value chains and other such potential areas. The banking sector has a responsible role to play not only as a facilitator of growth of the economy but also to earn its own bread," Das said.

According to him, a complete relook at the business strategy and orientation by the banks is the immediate need of the hour.

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