A day after meeting chiefs of top banks and shadow lenders, Prime Minister Narendra Modi on Thursday met heads of all financial sector regulators, including the Reserve Bank of India and Securities and Exchange Board of India, amid growing challenges posed by the Covid-19 outbreak to the stability of the financial sector.
Finance minister Nirmala Sitharaman and commerce and industry minster Piyush Goyal, too, are learnt to have attended the meeting. Heads of Insurance Regulatory and Development Authority of India and Pension Fund Regulatory and Development Authority were part of the meeting.
The meeting came at a time when the pandemic has ravaged the economy and raised fears of a spurt in bad loans, multiplying challenges for the broader financial system.
To finalise strategy for an economic revival, as lockdown restrictions are mostly lifted, Modi has already convened meetings with top officials from the finance ministry, Niti Aayog, the Prime Minister’s Economic Advisory Council and few other important ministries.
Various economists and analysts have predicted an up to 7% contraction in GDP growth in FY21, while they are divided over the possibility of a sharp recovery in FY22. However, economic affairs secretary Tarun Bajaj last week exuded confidence that the economy would witness a V-shaped recovery as early as FY22 and the situation wasn’t as bad as anticipated.
In its Financial Stability Report, the RBI has forecast that gross non-performing assets (NPAs) may jump from 8.5% at the end of March 2020 to 12.5%, a 20-year peak, by March 2021. However, the NPA level may shoot to 14.7% by March 2021 in case of a severity of economic stress.