RBI asks banks to brace up for corporate governance
The Indian financial sector is standing at crossroads: while the immediate impact of the fallout of Covid-19 will dominate the short-term, larger challenges relating to climate change and technological innovations will need a carefully crafted strategy
RBI's MPC is expected to begin raising key lending rate from April
Mumbai: The banking sector needs to strengthen corporate governance and risk management practices to deal with the uncertainties created by the Coronavirus pandemic, the Reserve Bank said on Tuesday.
With rapid technological advancements in the digital payments landscape and emergence of new entrants across the FinTech ecosystem, banks would also be required to prioritise upgrading their IT infrastructure and improving customer services, together with strengthening their cybersecurity.
"Banks would need to strengthen their corporate governance practices and risk management strategies to build resilience in an increasingly dynamic and uncertain economic environment," the RBI said in its report on Trend and Progress of Banking in India 2020-21.
It further said although credit off take by banks remained subdued in an environment of risk aversion and muted demand conditions during 2020-21, a pick up has started in the second quarter of 2021-22, with the economy emerging out of the shadows of the second wave of Covid-19.
"Going forward, revival in bank balance sheets hinges around overall economic growth which is contingent on progress on the pandemic front," it said.
However, banks would need to further bolster their capital positions to absorb potential slippages as well as to sustain the credit flow.
In a nutshell, the report said, "the Indian financial sector is standing at crossroads: while the immediate impact of the fallout of Covid-19 will dominate the short-term, larger challenges relating to climate change and technological innovations will need a carefully crafted strategy".
