Calls govt’s Covid response fiscally ‘very prudent’

Addressing a webinar, RBI Governor Shaktikanta Das today asked banks to avoid extreme risk aversion, as it was “self-defeating”. He advised them to smell vulnerabilities early to avoid frauds.

The comments come in the midst of the steadily slowing credit off-take, leading many to wonder if banks have become too “risk-averse” owing to their concerns over asset quality in a pandemic-stricken economy.

As per the RBI’s annual report released earlier this week, frauds doubled to Rs 1.85 lakh crore in FY20.

Das warned banks that extreme risk aversion would deprive them of their income and create a situation where they would be unable to earn their bread.

He appreciated the government’s response to the Covid-19 crisis as being fiscally “very prudent and very calibrated”. He said the government was “responsible” in announcing the measures right from the start which focused on the poor and vulnerable.

He also welcomed the government’s strategy of consolidating public sector banks, saying lenders with large balance sheets would be helpful. He, however, said that while size was essential, efficiency was “more important”. “There is no risk aversion but prudent banking. If we give money, we expect to get it back,” said Aditya Puri, MD, HDFC Bank— PTI

Daily Tribune:  28th August, 2020