Home / Industry / Banking /  No reason to doubt govt on fiscal path, banking system sound: Shaktikanta Das

A crisis-hit banking sector that is dealing with financial frauds, liquidity concerns, violation of corporate governance norms, declining asset quality and large exposure to stressed sectors at various levels may have had a breather today when Reserve Bank of India (RBI) Governor Shaktikanta Das assured that the sector was “sound and stable". He also said the regulator was closely monitoring shadow banks or non-banking financial companies (NBFCs).

Speaking at a press conference after the announcement of Friday’s monetary policy decision, the governor not only showed confidence in the banking system, but also admitted that there was no reason to doubt the government on their commitment to stick to the fiscal deficit target.

Here are the highlights from RBI Governor Das’s comments today:

Fiscal path: As far as the government sticking to its fiscal deficit target is concerned, Das said RBI has no reason to doubt the government’s commitment given their past record. A sharp reduction in corporate tax rate in September to 22% from 30% that may lead to lower tax collections has got many worried that the government may surpass its fiscal deficit target of 3.3% of GDP for 2019-20.

Banks' health: Allaying concerns in the sector, Das said the banking system was sound and stable. There was no need to panic unnecessarily. He also said that the Reserve Bank was closely supervising the NBFCs, whose liquidity issues have had a rippling effect on the auto and real estate sectors and added to the woes of a slowing economy.

PMC Bank case: In the light of the recent developments that took place at Punjab and Maharashtra Bank over alleged financial irregularities and threw depositors into disarray, Das said the regulator has acted swiftly and promptly in easing the worries of the depositors. He also appealed that one incident “cannot be and should not be used to generalise the health of the co-operative banking sector".

MPC's stance: Reiterating the decision taken by the Reserve Bank’s Monetary Policy Committee (MPC) today, Das said RBI would continue to maintain accommodative stance until growth was revived. The MPC decided to maintain accommodative stance with a view to stimulate growth by spurring private demand and investment, while ensuring that inflation remained within the medium-term target of 4%.

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