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Extreme risk aversion would have adverse outcomes for all, RBI Governor tells lenders

Extreme risk aversion would have adverse outcomes for all, RBI Governor tells lenders

The country's financial system is sound but lenders should desist from extreme risk aversion during COVID-19 pandemic and beyond, Reserve Bank Governor Shaktikanta Das said on Friday.

In his foreword to the bi-annual Financial Stability Report (FSR), Das said the top priority right now for banks and financial intermediaries should be for augmenting capital levels and improve resilience.

"In the evolving milieu, while risk management has to be prudent, extreme risk aversion would have adverse outcomes for all," Das said.

The comments from Das come at a time when credit growth has declined.

"The financial system in India remains sound; nonetheless, in the current environment, the need for financial intermediaries to proactively augment capital and improve their resilience has acquired top priority," Das said.

Financial sector stability is a prerequisite for giving confidence to businesses, investors and consumers, he said, adding "we have to remain extremely watchful and focused".

Das said governments, central banks and other public agencies across countries have made coordinated efforts to alleviate financial stress and build confidence and these measures have stabilised the financial system and markets.

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