The Report on Currency and Finance (RCF) for the year 2021-22: RBI

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The Report on Currency and Finance (RCF) for the year 2021-22: RBI

Recently the Reserve Bank of India has released its annual ‘Report on Currency and Finance (RCF) for the financial year 2021-22.

The theme of this report is “Revive and Reconstruct”. The report provides a strategy for stable economic growth of 6.5-8.5% over the medium term.

Key findings of the report-

  • It may take more than 12 years for the Indian economy to recover from the damage of COVID-19.
  • Incorporation of capital into public sector banks has helped in improving the capital-risk-weighted asset ratio (CRAR) of these banks. The CRAR of these banks was 11.8 per cent in March 2016, which improved to 14.3 per cent by December 2021.
  • The amount recovered through Asset Reconstruction Companies (ARC) had come down in recent years. However, it improved to 41 percent in the year 2020-21.
  • Inflation and de-globalization caused by the Russia-Ukraine crisis are other major challenges facing the economy.

Recommendations

  • The infrastructure of the Insolvency and Bankruptcy Code should be strengthened by increasing the number of benches of the National Company Law Tribunal (NCLT).
  • The risk factors affecting the business should be clearly explained. This is necessary to maintain investor confidence in the primary market.
  • Precautions need to be taken to protect stakeholders from digital fraud, data breaches and digital oligopoly.
  • Capital Adequacy Ratio (CAR) or CRAR is a measure of a bank’s available capital. It is expressed as a percentage of the bank’s risk-weighted credit exposure.
  • The Moral Hazard problem in the banking sector is based on the concept that some banks generally take risks to earn higher returns. This is because they know that in future the government will get them out of trouble.

Source – The Hindu

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