Economy is reviving but Omicron is a victim of the future, says RBI
Highlight
- RBI said that the Omicron version of coronavirus remains a major challenge for the economy.
- However, RBI noted that financial institutions remain resilient amid the pandemic.
While the economy has recovered steadily and has remained resilient since the second quarter of the current fiscal, the omicron version of coronavirus along with rising inflationary pressures remains the major challenge, the Reserve Bank said in its second financial stability report. In the preface to the report released on Wednesday, RBI Governor Shaktikanta Das noted that after the disastrous second wave in April-May 2021, the growth outlook has progressively improved, although there are headwinds from global growth and the recent Omicron virus.
A strong and sustainable recovery hinges on a revival of private investment and increased private consumption, which unfortunately is still below its pre-pandemic levels, he noted. Recognizing that inflation is a concern as it stems from a build-up of cost-push pressures, Das called for stronger supply-side measures to control food and energy prices.
Noting that financial institutions remain resilient amid the pandemic and stability in financial markets is maintained by policy and regulatory support, the governor is confident that the strong balance sheets of banks with high capital and liquidity buffers will be able to cushion future shocks. Will help
Citing stress tests on banks, the governor has also warned that gross NPAs may rise to 8.1-9.5 per cent by September 2022, from 6.9 per cent in September 2021.
The Governor concluded by reiterating the Reserve Bank’s steadfast commitment to ensuring a strong and efficient financial system that supports strong, sustainable and inclusive growth with macroeconomic and financial stability.
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