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Rajnish Kumar says government, corporates must work together for quick economic recovery

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The government and corporates must work together for a quick economic recovery, State Bank of India Chairman Rajnish Kumar said, adding that investment in infrastructure, in particular, should be stepped up.

“The government and corporates have to open up their wallets to invest … their actions should go hand-in-hand for a quick economic recovery since the vital middle class remains cautious amid ongoing unlocking of the economy,” 

Kumar added that increase in expenditure by both parties is “important” as money brought into the system will give consumption demand and infrastructure investment a boost. He also noted that direct benefit transfer schemes had put money directly in the hands of people, thus boosting rural demand.

“The middle class also plays a pivotal role, and for that segment to spend, the fear of COVID-19 has to go away,” he said.

The state lender's chief added that since the loan moratorium achieved its limited purpose, the Reserve Bank of India (RBI) now has to look at providing banks with restructuring relief “which would then determine who would qualify for a loan recast.”

“There is growing consensus that moratorium may not be needed, but there should be flexibility in loan repayments through restructuring and relaxing of provisioning norms for such rejig,” he noted and pointed out that the industry and bankers are keen to revive cash-strapped businesses and “future course of action should be left to the bank and the borrower.”

While economists have forecasted up to 10 percent contraction in GDP, Kumar was optimistic, stating that June saw fairly good recovery and many industries have “come back 75-80 percent of capacity utilisation levels.”

He, however, acknowledged that the lockdown has disrupted supply chains as some sourcing units may be in containment areas. “Overall, I believe we are in a much better position than where we were in April and May,” he said.