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Closely monitoring NBFCs to avoid systemic risk, says RBI

finance | Oct 5, 2018 4:04 PM IST

Closely monitoring NBFCs to avoid systemic risk, says RBI

The Reserve Bank of India (RBI) on Friday said they are closely monitoring the nonbanking financial companies (NBFC) to avoid systemic risk and the regulatory system to monitor the sector remains robust.

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The government has stepped in timely to stem the crisis at IL&FS
and RBI will engage with the new board if necessary to take further resolution steps, said the central bank governor, Urjit Patel, after the monetary policy meeting.
The RBI is trying to ensure the foreign exchange market remains liquid and not targeting any particular level, Patel said.
"The RBI's response to these unsettled conditions has been to ensure the foreign exchange market remains liquid with no undue volatility," Patel said.
The RBI on Friday kept the repo rate unchanged at 6.50 percent- the rate at which it lends money to commercial banks. The reverse repo rate was also retained at 6.25 percent.
The global economic activity has held up so far but is becoming asynchronous across economies in a highly unsettled international environment and the outlook is overcast with downside risks, said Patel.
On rupee depreciation, deputy governor Viral Acharya said RBI's stated policy has been to manage undue volatility in the currency market and Interest rate setting is exclusively focused on MPC’s mandate of inflation targeting.
RBI, Sebi and the government are closely monitoring money market conditions and will continue to proactively manage the system liquidity to meet the demand for reserve money growth, said Acharya, adding that the central bank would urge financial firms to place greater reliance on long-term finance than short-term paper.
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