RBI Governor Shaktikanta Das said economic growth is the “topmost priority” for the central bank, and “equal priority has to be given to financial stability”.
New Delhi, July 11:
COVID-19 is the worst health and economic crisis in last 100 years, Reserve Bank of India (RBI) Governor Shaktikanta Das said on Saturday. “The outbreak of COVID-19 pandemic is unambiguously the worst health and economic crisis in the last 100 years during peacetime with unprecedented negative consequences for output, jobs and well-being,” he said, in conversation with Rajnish Kumar, chairman of the country’s largest lender by assets, State Bank of India, through a video call at the 7th SBI Banking & Economics Conclave.
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The COVID-19 outbreak has “dented the existing world order, global value chains, labour and capital movements across the globe, and, needless to say, the socioeconomic conditions of large sections of the world population”.
“The COVID-19 pandemic perhaps represents so far the biggest test of robustness and resilience of our economic and financial system,” Mr Das said.
Mr Das said economic growth is the “topmost priority” for the RBI, and “equal priority has to be given to the aspect of financial stability”.
“Banks and other financial entities are today at the forefront of the country’s counter-measures against the economic impact of COVID-19. They are the transmission channels for the RBI’s monetary, regulatory and other policy measures… and also the implementation vehicles for the financial backstop measures announced by the government,” the RBI Governor said.
The Reserve Bank of India has taken “a number of important historic measures to protect our financial system and support the real economy in the current crisis”.
The RBI has undertaken both conventional as well unconventional measures to boost market confidence and ease the liquidity stress.
The RBI chief highlighted that the central bank has announced liquidity measures worth Rs 9.57 lakh crore since February this year, equivalent to 4.7 per cent of the country’s nominal GDP in 2019-20.
“While the eventual success of the measures will only be known after some time, they appear to have worked so far, and that gives us a lot of satisfaction and inspires us also to take further measures,” the RBI Governor said.
The central bank already had an “accommodative” stance before the onset of the COVID-19 outbreak, he said. The RBI had changed its stance from “neutral” to “accommodative” in June last year. While an “accommodative” stance eradicates the possibility of stricter monetary policy measures such as a rate hike, a “neutral” stance means the central bank can move either way.
Mr Das reiterated that since February 2019, the RBI has cut the repo rate by a total 250 basis points (2.5 percentage points).