23 AUG,2020 | MEDC
Given the state of our pandemic-battered economy, a key policy priority needs to be financial sector reforms. It is necessary but not sufficient to bring PSBs under the exclusive regulation of the RBI and reduce public ownership to less than 50%, as the private sector scams at many banks have shown. NPAs are posing a major threat to financial sector stability, and both banks and NBFCs need to strengthen their supervisory practices accordingly. India also needs to abolish regulations dis-incentivizing the growth of MSMEs, as they are a large and reliable source of employment in the country. Apart from economic reforms, the quality of our governance institutions also matters. This includes the legislature, executive and judiciary, all of whom continue to operate at only a fraction of their full capacity. Covid-19 has changed many equations in the financial sector, and progressive fiscal reforms will help to play an important role in the emerging scenario. They should be pursued wholeheartedly by the government.
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