FILE PHOTO: The Reserve Bank of India seal is pictured on a gate outside the RBI headquarters in Mumbai, India, February 2, 2016. REUTERS/Danish Siddiqui/File Photo
Private consumption will come back gradually with non-discretionary spending leading the way, until a durable increase in disposable incomes enables discretionary spending to catch up, the bank added. Key downside risks to growth are wider pandemic spread, a deviation of seasonal monsoon rains from the predicted normal volume and global financial market volatility, the bank said.
The RBI said the banking sector needs to be freed of risk aversion, which is impeding the flow of credit to productive sectors and undermining the role of banks in the economy. In a separate report, the RBI had warned that banks’ bad loans could nearly double by the end of this fiscal year, while the capital adequacy ratio could fall to 11.8% in a severely stressed situation.
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