The Reserve Bank of India (RBI) has reminded bankers that measures announced by it to tackle the impact of the credit crisis are ad hoc in nature and has advised them to ensure that they plan for the long term.
“The banks would, therefore, be well advised to ensure that their business strategies and decisions are guided by the longer-term perspective of the systemic and macro-economic developments and are not unduly influenced by the current episode of the exceptional events,” RBI Deputy Governor V Leeladhar said at the Bankers’ Club in Kolkata yesterday.
Leeladhar said though the measures taken by RBI would have positive effect on the economy, the challenges still remain as the global uncertainties continue to persist.
“... There has been wide-ranging de-leveraging in evidence as the global investors were constrained to liquidate their investments in the financial markets. This has also resulted in significant FII divestments in the Indian equity markets and capital outflows from India. This, in turn, impacted the systemic liquidity and also exerted pressure on the exchange rate of the rupee,” he said.
The RBI intervention in the forex markets also added to pressure on the rupee liquidity, he said. Following RBI’s series of measures to ensure availability of credit, banks have also reduced their lending rates, which are expected to have a “salutary effect” on the credit offtake in the system, the deputy governor said.
Since the financial turmoil intensified in the middle of September, RBI has taken a host of measures to enhance liquidity through reduction of the Cash Reserve Ratio and the Statutory Liquidity Ratio, providing special refinance facilities and opening special repo facilities for mutual funds and non-banking finance companies.