Asserting that the second wave of COVID-19 has posed some challenges, RBI Deputy Governor M K Jain has said that both the central bank and the government have taken steps to mitigate its impact. He also said that the domestic banking system is strong, as per the preliminary data for the quarter ended March 2021. The data suggest that in terms of CRAR that has been improved upon, the profitability has been improved upon, provision coverage ratio that has also been improved over the previous year, and the gross NPA as well as net NPA has come down.

Observing that the COVID-19 second wave has some challenging aspects, Jain said both the RBI and the government are dealing with this and taking steps to smoothen the impact on the financial system. The central bank has announced a slew of measures in the last two months to help flow of credit to the desired sectors and maintain adequate level of liquidity in the system. He said the RBI strives to ensure financial resilience of banks and NBFCs by prescribing a set of micro prudential norms like minimum capital requirements.

To maintain resilience, he said, the RBI has asked financial entities to undertake stress tests at regular intervals and accordingly take risk mitigation measures. He further said the financial system, both in India and overseas, is witnessing rapid shifts in the operating environment due to changing competitive landscape, automation and increasing regulatory supervisory expectations. He also expressed hopes that banks and other financial institutions in India will rise to the challenge, continue to demonstrate the resilience and be able to contribute to a $5 trillion economy and beyond.

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