RBI rules out special liquidity window for NBFCs
In case of any stress building up, RBI promised to fulfill central bank's role as the lender of last resort.
But in case of any stress building up, RBI promised to fulfill central bank's role as the lender of last resort.
"RBI is guided by the principle of addressing system wise liquidity. RBI also stands ready to be the lender of the last resort, provided the condition warrant that sort of extreme measure," deputy governor Viral Acharya said.
"Our assessment shows there is no such necessity at present, given the sound health of the economy. We are at the level of aggregate credit growth which is comfortably in excess of nominal GDP growth," Acharya said.
A special liquidity window for NBFCs was one of the key points in the difference of opinion between RBI and the government leading to acrimonious public rift between the two institutions ever since the liquidity crisis broke out following defaults by IL&FS and its group companies in the last half of September.
Acharya said that the banking regulator has been in regular touch with market watchdog Sebi to access the fallout of mutual fund redemption and rollover risk for NBFCs and housing finance companies. RBI has also taken a slew of measures to improve cash flows for NBFCs.
It allowed banks to provide partial credit enhancement on bonds raised by NBFC and HFCs, helping raise credit quality of bonds. It has also relaxed securitisation rules to allow the risk to be transferred to better funded bank balance sheets.
"Our assessment is that these measures have collectively eased the funding stressed in a steady manner over the past two months. We have given NBFCs and HFCs time and the opportunity to make the own adjustment in both asset and liability side, in particular in the duration structure of their liabilities," Acharya said.
Governor Patel said liquidity needs arising from the growth in currency and the central bank's foreign currency operations were met through a mixture of tools based on an assessment of the evolving liquidity conditions.
RBI injected durable liquidity amounting to Rs 36000 crore in October and Rs 50000 crore in November through open market purchase operations, bringing total durable liquidity injection to Rs 1.36 lakh crore for 2018-19 so far. Liquidity injected under the daily liquidity adjustment facility on an average daily net basis, was Rs 56000 crore in October, Rs 80600 crore in November and Rs 10500 crore in the first four day of December.
"The weighted average call rate continues to remain soft and below the policy rate on average. possible becaise of various liquidity tools," said Acharya
RBI promised to increase the frequency and quantum of open market operation till march and plans to conduct long term repo auctions to tide over advanced tax outflows.