Need to brace for financial turmoil: RBI guv

India needs to brace for any sudden bout of global financial market turbulence that domestic economy and financial markets may face going ahead, RBI Governor Shaktikanta Das said on Friday amid an environment of high global uncertainty.

“Going forward, the foremost priority is to preserve domestic macroeconomic and financial stability, especially in a global environment that is clouded by high uncertainty. Not only downward risks to global growth, trade and investment have risen, the spillover effects on emerging markets due to increase in global interest rates could also be profound,” the RBI governor said at the 9th Vibrant Gujarat Summit here.

He said close monitoring of the external sector was required, given the sharp movements in global crude oil prices and global financial market volatility. These are the two global shocks that have implications for India’s current account deficit and financial flows.

Another challenge that Indian companies may face, according to Das, pertains to developments around Brexit.

“Indian companies and policymakers need to suitably weigh all opportunities and challenges, and accordingly re-strategise to respond appropriately,” he said. Though India has less dependence on the UK, Brexit could impact Indian IT companies and others due to a wild swing in the pound vis-à-vis dollar and the rupee.

The governor also emphasised the need for a continuous vigil on the asset quality of banks as well as the resolution of stressed assets with a focus on the implementation of the new resolution framework.

“It will remain critical to ensure that further slippages are contained,” he said.

“Cyber risk is a major challenge. Formulation of comprehensive cyber risk and resilience policies and diligent implementation is critical,” Das said, adding that another area where policy action is required is corporate governance in banks with a focus on transparency and accountability.