Reserve Bank of India - Speeches

Tags

Top Highlights

• The Indian financial sector has been stable and resilient, as reflected in sustained growth in bank credit backed by improved asset quality, adequate capital and liquidity buffers and robust earnings growth

• By the second half of the 20th century, inflation surges world-wide caused by post-war fiscal activism and recurring oil price shocks, in the backdrop of stagnating economic activity, resulted in price stability being recognised as the prime objective of central banks.

• LOLR principle remains the cornerstone of modern central banking and its scope has widened over time to encompass financial stability in respect of financial markets and institutions

• The role of central banks had evolved by the 19th century, as they came to be recognised primarily as the lender of last resort (LOLR)

• As inflation targeting gained ground from the early 1990s,

• monetary policy should primarily – or perhaps solely – focus on price stability, with financial stability falling in the domain of prudential regulation and supervision.

• The crisis came as a powerful rebuke to central banks for having neglected financial stability in their single-minded pursuit of price stability.”4

• Central banks again faced a trade-off between price and financial stability during the COVID-19 pandemic as economic activity came to a standstill amidst elevated global commodity prices and disruption of supply chains

• multiple linkages running between financial stability to price stability

• financial stability is not specifically defined

• Financial Stability refers to the smooth functioning of the financial markets and institutions, (it) does not mean absence or avoidance of crisis but presence of conditions conducive to efficient functioning without serious disruption.

• When the COVID-19 pandemic scarred the global economy including India, our response was swift and decisive. We put in place business continuity measures even before the nation-wide lock down was announced.

• policy repo rate was reduced sizeably by 115 bps in a span of two months

• Financial conditions were eased substantially by further reducing the reverse repo rate,

• economic activity in India exhibits resilience on the back of strong domestic demand

• Real GDP growth for 2023-24 is projected at 6.5 per cent and India is poised to become the new growth engine of the world

• Headline CPI inflation has moderated sharply to 5.0 per cent in September 2023 with correction in vegetable prices.

• Reserve Bank has adopted a prudent approach and taken several initiatives to revamp regulation and supervision of banks, NBFCs and other financial entities

• Macro stress tests for credit risk reveal that scheduled commercial banks (SCBs) would be able to comply with the minimum capital requirements even under severe stress scenarios

• Price stability and financial stability complement each other. In fact, price stability is an anchor for financial stability,