Reserve Bank of India Governor Shaktikanta Das on Friday discussed the slower transmission of rate reduction and stressed asset resolution with the chief executive officers of public sector banks (PSBs) and the chief executive of Indian Banks Association (IBA).
During the meeting, the issue of less than desired level of transmission of monetary policy rates was discussed with the CEOs of banks, the central bank said. Even though the RBI has cut the Repo rate by 75 basis points in 2019, banks have not fully passed on the benefits to their customers.
Analysts are expecting another rate cut in the next policy review in August.
In his opening remarks, the RBI Governor acknowledged discernible improvements in the banking sector while underscoring that several challenges still remain to be addressed, particularly with regard to the stressed asset resolution and credit flows to needy sectors.
“Other subjects taken up for discussion included credit and deposit growth on the back of a slowing economy, flow of credit to needy sectors while following prudent lending, robust risk assessment and monitoring standards and improving recovery efforts,” the RBI said.
The meeting also discussed about giving impetus to resolution of stressed assets facilitated by revised framework for resolution announced by the RBI on June 7, 2019, and strengthening internal control mechanism for improved fraud risk management.
The recent initiatives to address issues relating to non-banking financial companies (NBFCs) and the role banks can play in mitigating lingering concerns also came up for discussion on Friday.
Das also underlined the importance of expanding and deepening the digital payments ecosystem in line with the recommendations of the Report of the Committee on Deepening of Digital Payments, headed by Nandan Nilekani, and the Reserve Bank’s Payment System Vision Document 2021.
The banking regulator stated that on the suggestion of the Governor, it was agreed that banks will identify one district in each state to make it 100 per cent digitally enabled within a time frame of one year in close coordination and collaboration with all stakeholders, including state level bankers’ committees (SLBCs), state governments, regional offices of RBI, etc.
“To the extent feasible, such districts may be converged with the ‘Transformation of Aspirational Districts’ programme of the Government of India. IBA is also expected to play a catalytic role in this regard,” RBI said.