India’s economy is showing signs of getting back to normalcy, Reserve Bank of India Governor Shaktikanta Das said on Saturday.
In a keynote address at the 7th SBI Banking and Economics Conclave, Das noted that medium term outlook still remains uncertain.
“Despite the substantial impact of pandemic in our daily lives, the financial system of the country, including all the payment systems and financial markets, are functioning without any hindrance,” he said.
“The Indian economy has started showing signs of getting back to nor malcy i n response to the staggered easing of restrictions. It is, however, still uncertain when supply chains will be restored fully; how long will it take for demand conditions to normalise; and what kind of durable effects the pandemic will leave behind on our potential growth.”
He elaborated that a multi-pronged approach adopted by the Reserve Bank has p rovided a cushion from the immediate impact of the pandemic on banks, however, the medium-term outlook is uncertain and depends on the Covid-19 curve.
“Policy action for the medium-term would require a careful assessment of how the crisis unfolds. Building buffers and raising capital will be crucial not only to ensure credit flow but also to build resilience in the financial system.”
According to Das, the Reserve Bank has asked financial institutions to carry out a Covid stress test to see weaknesses in their balance sheet.
“We have recently advised all banks, non-deposit taking NBFCs and all deposit-taking NBFCs to assess the impact of Covid-19 on their balance sheet, asset quality, liquidity, profitability and capital adequacy for the financial y ear 2020-21.
“Based on the outcome of such stress testing, banks and non-banking financial companies have been advised to work out possible mitigating measures, including capital planning, capital raising, and contingency liquidity planning, among others. The idea is to ensure continued credit supply to different se ctors of the economy and maintain financial stability,” Das said.
Besides, he cited that RBI has strengthened its offsite surveillance mechanism to proactively find weak institutes and to immediately take corrective steps.
“As the lock-down has obstructed our on-site supervisory examination to an extent, we are further enhancing our off-site surveillance mechanism. The objective of the off-site surveillance system would be to ‘smell the distress’, if any, and be able to initiate pre-emptive actions.
“This requires use of market intelligence inputs and on-going engage ments with financial institutions on potential vulnerabilities. The off-site assessment framework, which takes into account macro and micro variables, i s more analytical and forward looking and aimed at identifying vulnerable se ctors, borrowers as well as supervised entities.”
Furthermore, he said the supervisory approach of the Reserve Bank is to further strengthen its focus on developing financial institutions’ ability to identify, measure, and mitigate the risks.
“The new supervisory approach will be two-pronged – first, strengthening the internal defences of the supervised entities; and second, greater focus on identifying the early warning signals and initiate corrective action,” Das said.
He cited that to strengthen the internal defences, higher emphasis is now be ing given on causes of weaknesses than on symptoms.
“The symptoms of weak banks are usually poor asset quality, lack of profitability, loss of capital, excessive leverage, excessive risk exposure, poor conduct, and liquidity concerns. These different symptoms often emerge together,” he said.
“The causes of weak financial institutions can usually be traced to one or more of the following conditions: inappropriate business model, given the business environment; poor or inappropriate governance and assurance functions; poor decision making by senior management; and misalignment of intern al incentive structures with external stakeholder interests.”
Accordingly, he said RBI is placing special emphasis on the assessment of business model, governance and assurance functions, as these have been the are as of heightened supervisory concern.
“Supervised entities generally tend to focus more on business aspect seven to the detriment of governance aspects and assurance functions. There was also an apparent disconnect between their articulated business strategy and actual business operations. The thrust of the approach, therefore is, to improve the risk, compliance, and governance culture amongst the financial institutions,” he said.
In addition, he said that post containment of Covid-19, “a very careful trajectory has to be followed in orderly unwinding of counter-cyclical regulator y measures and the financial sector should return to normal function ing without relying on the regulatory relaxations as the new norm”.
“The Reserve Bank is making continuous assessment of the changing trajectory of financial stability risks and upgrading its own supervisory framework to ensure that financial stability is preserved,” he said.
“Banks and financial intermediaries have to be ever vigilant and substantially upgrade their capabilities with respect to governance, assurance functions and risk culture.”
SpiceJet operates first long-haul wide-body charter flight to Canada
Airline major SpiceJet on Saturday became the first Indian budget carrier to operate a long-haul wide-body charter flight to North America.
The airline repatriated 352 Canadian nationals and permanent residency holders from New Delhi to Toronto on Saturday. The airline chartered a wide-body Airbus A330-900 Neo aircraft for the purpose.
The twin-aisle A330 Neo aircraft has a configuration of 353 economy and 18 business class seats.
“Our first-ever long-haul charter flight to Canada is yet another example of our commitment to helping as many people as we can to get back home to their families in these troubled times. Being the first Indian budget airline to operate a non-stop long-haul flight to North America is a proud moment for the SpiceJet family,” Ajay Singh, Chairman and Managing Director, SpiceJet, said in a statement.
“We have operated flights across the globe repatriating close to 85,000 people and transporting over 28,000 tonnes of medical and essential supplies, and we intend to keep on with our efforts,” the statement said.
On August 1, SpiceJet had repatriated 269 Indians from Amsterdam to Bengaluru and Hyderabad.
The airline has operated over 515 charter and Vande Bharat flights to help repatriate close to 85,000 stranded Indian citizens from countries such as the Philippines, Kyrgyzstan, Russia, the Netherlands, the UAE, Saudi Arabia, Oman, Qatar, Lebanon, Bangladesh, Maldives and Sri Lanka.
PM Narendra Modi to launch Rs 1 lakh crore financing facility on Sunday
Prime Minister Narendra Modi will launch the financing facility of Rs 1 lakh crore under the Agriculture Infrastructure Fund on Sunday and also release the sixth instalment of funds of Rs 17,000 crore to 8.5 crore farmers under the PM-KISAN scheme.
Modi will take part in the event around 11 a.m. via video conferencing and the occasion will be witnessed by lakhs of farmers, cooperatives, and citizens across the country. Union Minister of Agriculture and Farmers Welfare, Narendra Singh Tomar, will also be present on the occasion.
The Union Cabinet has approved the Central Sector Scheme of financing facility under “Agriculture Infrastructure Fund” of Rs 1 lakh crore. The fund will catalyse the creation of post-harvest management infrastructure and community farming assets such as cold storage, collection centres, processing units.
These assets will enable farmers to get greater value for their produce, as they will be able to store and sell at higher prices, reduce wastage, and increase processing and value addition.
Prime Minister’s Office (PMO) in a statement said Rs 1 lakh crore will be sanctioned under the financing facility in partnership with multiple lending institutions.
Eleven of the 12 Public Sector Banks have already signed MOUs with the Department of Agriculture Cooperation and Farmers Welfare (DAC&FW). A three per cent interest subvention and credit guarantee of up to Rs 2 crore will be provided to the beneficiaries to increase the viability of these projects.
The beneficiaries of the scheme will include farmers, Picture Archiving and Communication System (PACS), Marketing Cooperative Societies, Farmer Producer Organization Scheme (FPOs), Self Help Groups (SHGs), Joint Liability Groups (JLG), Multipurpose Cooperative Societies, Agri-entrepreneurs, startups, and Central or state agency or local body sponsored Public-Private Partnership Projects.
The Pradhan Mantri Kisan Samman Nidhi Yojna (PM-KISAN) scheme, launched on December 1, 2018 has provided a direct cash benefit of over Rs 75,000 crore to more than 9.9 crore farmers. This has enabled them to fulfil their agricultural requirements and support their families.
The rollout and implementation of the PM-KISAN scheme has happened at an unparalleled pace, with funds being directly transferred into the Aadhaar authenticated beneficiaries’ bank account to prevent leakage and increase convenience for farmers.
The scheme has also been instrumental in supporting farmers during the Covid-19 pandemic, through the release of nearly Rs 22,000 crore to aid the farmers during the lockdown period.
Petrol and diesel prices may rise again from next week
Consumers might see fuel prices going up again as oil companies are bracing up to pass the rise in global crude and product prices on retail sales.
Accordingly, petrol and diesel prices may begin their rising trend all over again much to the discomfort of fuel consumers that have faced constant increasing prices since June 7.
The pump price of petrol and diesel had remained unchanged for last one week as oil prices were steady and crude was hovering around $42 per barrel mark for past several days. But with crude price now rising and inching towards $45 per barrel mark, oil companies said that they will be left with no option but to raise retail prices of petrol and diesel.
“We will observe the price movement for next couple of days and if oil prices remains firm, a decision may be taken to revise retail product prices again under the daily price revision mechanism,” said an executive of a public sector oil company on condition of anonymity.
Diesel continues to be priced at Rs 73.56 per litre in Delhi while petrol price remains static at Rs 80.43 per litre. This price level has been maintained since last Friday when diesel were cut by a sharp Rs 8.38 per litre following Delhi government’s decision to reduce VAT on the product from 30 per cent to 16.75 per cent.
This price cut has again made diesel cheaper than petrol in the city after more than month. In fact, diesel is cheaper than petrol in Delhi by the widest margin among all metros now.
Delhi was the only major city in the country where diesel prices were higher than petrol. Diesel prices first rose above petrol in Delhi last month, much to the discomfort of the transport sector and the fuel dealers.
The Rs 1.5 per litre differential had led substantial loss of business to pump operators in Delhi as vehicles were getting diesel filled in neighbouring Haryana and Uttar Pradesh.
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