Will take steps on liquidity if needed, says Shaktikanta Das

New Delhi: Ahead of a meeting with the shadow banking sector representatives, RBI governor Shaktikanta Das said on Monday that the central bank is open to infusing “need-based” liquidity into the financial system.

Mr Das said that the RBI constantly monitors liquidity conditions and would take steps to address any deficit in the banking system. But he said it was also keen to prevent the creation of excess liquidity. “The Reserve Bank would not like a situation where liquidity becomes kind of loose money,” he said. 

“Any infusion of liquidity will have to be very carefully considered and has to be need-based,” said Mr Das. RBI would meet representatives of NBFCs in Mumbai on Tuesday.

“There has been a lot of discussion and a lot of views have been expressed about the issue of liquidity faced by the NBFCs,” he said.

Finance ministry has pressed the RBI over the past few months to ease lending and capital rules for banks and provide more liquidity to shadow banks. They have also urged the RBI to step up lending support for small businesses and allow the government to use more of the central bank’s surplus reserves to boost the economy.

Asked if there are any pressure points as far as liquidity is concerned, he said it would not be right to mention any particular sector. “It’s market-related information, so, anything that I say on this matter during market hours has other implications,” he said.

Based on several inputs from various stakeholders, the RBI recently announced additional Open Market Operation (OMO) of '60,000 crore spread over December and January, he said. “We do believe that the liquidity requirement of the economy and financial institutions to a great extent are met,” he said.

Mr Das said any generalised farm loan waiver adversely impacts the credit culture and the behaviour of borrowers, amid various state governments announcing waivers. “Elected governments have the constitutional mandate to take decisions with regard to their finance but every state government, before taking decisions on any kind of farm loan waivers, has to very carefully examine its fiscal space,” he said.  

“It’s also for the individual governments to examine whether they have the fiscal space to meet the requirements and release the money to the banks immediately. Any generalised kind of write-off obviously has adverse effect on the credit culture and the future credit behaviour of the borrowers,” he added.