Mumbai: Reserve Bank of India Governor Shaktikanta Das has said that banks need to raise capital in advance on the basis of forecasts so that they will have sufficient capital ‘buffer’ in times of crisis like corona virus.
Das, while addressing the Banking and Economic Conclave of State Bank of India on Saturday, said that creating and raising a safe capital fund is not only important in terms of ensuring the flow of credit, but also strengthens the financial system. He said, “In such a situation it becomes more important that banks improve the functioning of their operations, and sharpen their efficiency of risk management.” It is important for banks not to wait for the situation to arise and to raise capital on an advance basis. “
Das said that both public and private sector banks should go ahead and create an adequate capital buffer. The governor said that the economic impact of the lockdown and the fall in growth rate after the lockdown would reduce the capital of banks and increase their non-performing assets (NPAs). In such a situation, recapitalization of public and private sector banks will be necessary. The government has infused Rs 3.08 lakh crore in public sector banks over five years from 2015-16 to 2019-20. However, the government has not made any such commitment in the budget for FY 2020-21.
