Notebandhi to transform economy: Urjit Patel

Short-term disruptions in certain segments of the economy and public hardship notwithstanding, demonetisation will transform the economy and impart “far-reaching“ changes going forward, according to RBI governor Urjit Patel.
In a statement issued as part of the Financial Stability Report (FSR), Patel said that the withdrawal of Rs.500 and Rs.1,00 notes will result in greater intermediation, efficiency gains, accountability and transparency through increasing adoption of digital modes of payments.
The FSR is a half-yearly exercise carried out by central banks across the world to identify weak links in financial systems and see how they impact various players under stress test conditions.

According to the RBI's stress tests under the baseline scenario, the gross non-performing asset (GNPA) ratio may increase from 9.1% in September 2016 to 9.8% by March 2017 and further to 10.1% by March 2018.
While the report warns of a temporary loss of growth momentum (expected to slow down to 7.1% as against the 7.6% projected earlier), it expects the impact of demonetisation on cash-intensive sectors to be only transitory.

The RBI is sanguine about domestic risks, but it has raised concerns of trade slowdown and uncertainty in financial markets globally , notwithstanding resilience to outcomes of the Brexit referendum and the US election.

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