Liquidity concern: RBI ready to step in if required, says governor Shaktikanta Das

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Published: January 8, 2019 2:32:44 AM

RBI is constantly monitoring and will take steps whenever there is a need to deal with the liquidity deficit. At the same time, I must also add the RBI would not like a situation where liquidity becomes a kind of loose money, says Shaktikanta Das, RBI governor

RBI governor Shaktikanta Das

Reserve Bank of India (RBI) governor Shaktikanta Das said on Monday the central bank was ready to pitch in to ensure there was no liquidity crunch in the system. Any such infusion, however, will be strictly “need-based” and the RBI won’t just inject “loose money”. The appetite for liquidity is largely satiated now, he said, especially after the announcement of additional open market operations (OMOs) of Rs 60,000 crore over December and January.

While a one-time restructuring scheme for “standard loans” of MSMEs, announced last week, was aimed at benefiting as many enterprises as possible, it wouldn’t be at the cost of adequate risk assessments, the governor said. Banks had already been directed to look at the “viability” of individual proposals and monitor the restructuring programme, he added.

As part of the RBI’s latest efforts to step up consultations with stakeholders, Das met MSME associations in Delhi on Monday to take stocks of their problems. He will meet representatives of NBFCs, which were facing a liquidity crunch in the aftermath of the IL&FS crisis, in Mumbai on Tuesday to get a perspective on their liquidity needs, among other issues. Commenting on farm loan waivers, which are a regular feature during the poll season, Das said “generalised write-offs” distorted credit culture and states should weigh their fiscal space before announcing such a relief. Various state governments have declared farm loan waivers worth `1.88 lakh crore since April 2018, with analysts predicting a total waiver of Rs 2.75-3 lakh crore by the 2019 general election.

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“…RBI is constantly monitoring and will take steps whenever there is a need to deal with the liquidity deficit. At the same time, I must also add the RBI would not like a situation where liquidity becomes a kind of loose money. Any infusion of liquidity will have to be very carefully considered and has to be need-based,” Das said.

Bank of America Merrill Lynch (BofAML), in a report in late November, had said the RBI might have to conduct OMOs of another Rs 1,60,000 crore in the fourth quarter of the current fiscal to tide over the banking liquidity crunch. The money market deficit was already running at a high Rs 1,00,000 crore, and after advance tax outflows, it could climb to Rs 1,40,000 crore in December, it had added. The governor didn’t reveal if the central bank would transfer an interim dividend to a poll-bound government to tide over the fiscal problem.

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