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RBI board member urges PM Modi for banking sector package

Mumbai: Hinting that the RBI measures to address the fallout of the coronavirus pandemic on the economy, its board member Satish Marathe has urged the prime minister for a larger package of sops for the entire banking sector including relaxing NPA recognition, provisioning and downgrades of accounts

Seeking a temporary forebearance of about a year, Mr Marathe requested prime minister Narendra Modi to “keep in abeyance, all norms relating to income recognition and assets classification, provisioning and downgrade of borrowal accounts, reporting to credit information companies for all accounts that must have got classified as NPAs during the just concluded financial year 2019-2020” in a letter dated April 09.

Mr Marathe, who also heads “Sahakar Bharati” an industry body of co-operatives underscored that a package for the banking sector is very important bring back the economy on track. “We need to to seek active involvement of our banking sector to rebuild the economy” he said. ” If advances account get classified as NPAs due to both lockdown and slowdown, chances of revival of such accounts would be bleak as bank officials continue to be apprehensive of possible future investigations by CVC, CAG and CBI.”

Significantly, the letter which was written more than a week after the Reserve Bank introduced a slew of measures to salvage different segments including retail and corporate borrowers by allowing a three month moratorium on loan repayment and liquidity support to the financial markets. “Merely by injecting liquidity, reducing interest rates, providing guarantees through SPVs/SIDBI, relaxing delinquency norms in the current year will not result in the revival of the economy” Marathe wrote in his letter to the prime minister.

“Perhaps they thought that we could overcome the impact of the crisis in three months then.” Mr Marathe told ET. ” But now, given the severity of the impact of the pandemic, it appears that it might take much longer for the economy to come back on track”. The Reserve Bank, in its monetary policy report released on Thursday has highlighted the difficulty in assessing the economic impact of the nation-wise lockdown to contain the spread of Covid-19 which has already infected more than 6000 people through-out the country hurting the manufacturing sector, particularly the MSMEs the most which have rely more on migrant labour.

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