Banks, NBFCs to Raise Capital, Do Stress Tests

Banks and non-banking financial companies (NBFCs) must get busy raising capital and do stress test as soon as the Covid-19 pandemic is over to build resilience and to be able to provide capital to the economy to ensure growth, Reserve Bank of India (RBI) Governor Shaktikanta Das said. “We are today at the doorstep of the revival process following the Covid crisis. We have told banks and NBFCs that as soon as the crisis settles, they must do stress tests,” Das said at a panel discussion during the launch of 15th Finance Commission Chairman N K Singh’s book. “I have appealed and impressed upon them to proactively build capital buffers, not only to strengthen their inherent resilience, but also to have adequate capital to ensure that the credit flow is maintained in a phase when the economy comes for a revival,” Das said. Many of these banks and NBFCs have already raised capital, and many others are planning to do so in the coming months. The RBI governor stressed the need for governance reforms in banks and NBFCs, and said it should not be mixed with ownership only. After the Covid crisis is over, the government "certainly will have to roll out a fiscal roadmap” to ensure it gets back to the debt-to-GDP path that the 15th Finance Commission has set in, Das said. At the moment, though, both fiscal and monetary policies are countercyclical and the general government debt is exceeding the targets earmarked, which would need to be rolled back. Still, the measures taken by the government have been fiscally prudent and helped sustain the financial sector.