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Banks Must Tighten Up Threat Management Practices To Counter Covid-Induced Obstacles: RBI

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RBI has actually stated banks need to tighten their risk management practices to counter Covid-induced challengesMumbai: Reserve Bank of India (RBI) has actually said that the country's banking sector needs to tighten its business governance and threat management practices to deal with difficulties positioned by the Coronavirus pandemic.

Banks would require to reinforce their corporate governance practices and risk management strategies to develop resilience in a progressively dynamic and uncertain financial environment, the RBI said in its report on Trend and Progress of Banking in India 2020-21 .

In the middle of rapid technological developments in the digital payments landscape and development of brand-new entrants throughout the FinTech environment, banks would likewise be needed to prioritise updating their IT infrastructure and improving customer support, together with reinforcing their cybersecurity.It further stated that though credit offtake by banks remained subdued in an environment of risk aversion and muted demand conditions throughout 2020-21, a choice up has started in the second quarter of 2021-22, with the economy emerging out of the shadows of the second wave of Coronavirus pandemic.

Going forward, revival in bank balance sheets hinges around total economic development which is contingent on progress on the pandemic front, it said.However, banks would need to further boost their capital positions to take in possible slippages along with to sustain the credit flow.In a nutshell, the report said, the Indian financial sector is standing at crossroads: while the immediate effect of the fallout of COVID-19 will dominate the short-term, bigger challenges associating with climate modification and technological innovations will require a carefully crafted strategy .

The reserve bank has also ensured a safe, sound and competitive financial system through its regulative and supervisory initiatives.During 2020-21, the combined balance sheet of set up business banks (SCBs) expanded in size, regardless of the pandemic and the resultant contraction in financial activity.In 2021-22 so far, nascent signs of recovery are visible in credit development.

Deposits grew by 10.1 percent at end-September 2021 as compared to 11 per cent a year back, the report said.

SCBs' gross non-performing assets (GNPA) ratio decreased from 8.2 percent at end-March 2020 to 7.3 percent at end-March 2021 and further to 6.9 percent at end-September 2021, the report said.On recapitalisation requirements after COVID-19, the RBI stated that based on the capital position as of September 30, 2021, all public and economic sector banks kept the capital preservation buffer (CCB) well over 2.5 per cent.

Going forward, however, banks would require a greater capital cushion to handle difficulties on account of the ongoing stress experienced by borrowers in addition to fulfill the economy's prospective credit requirements, it said.The apex bank also stressed that collective techniques for prompt capital infusion need to be continued by the banks.




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