No liquidity shortage at the moment: RBI Governor
Reserve Bank Governor Shaktikanta Das on Monday said the Central bank will take steps if there is a shortage of liquidity in the economy though the current cash needs are largely met.
The Governor also said that he will be meeting with representatives of non-banking finance companies (NBFCs) on Tuesday in Mumbai to understand the liquidity crunch faced by the sector.
Pointing out that liquidity in the system is regularly monitored, Das said the RBI will take steps whenever there is any 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 carefully considered and has to be need-based.
“Therefore, caution and care have to be exercised by the RBI so that excess liquidity, … Sometimes have adverse consequences, that is not created,” he told reporters here after meeting representatives of MSMEs.
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 Rs 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.
On meeting with the NBFC sector, Das said the RBI will have detailed interaction with stakeholders.
“Over the last several months you would be aware that there has been a lot of views expressed about the issue of liquidity faced by NBFCs. So, Tuesday’s meeting will be utilised to get a perspective from the NBFCs … I am looking forward to our interaction with NBFCs and understand their perspective on various issues. Liquidity issue has been mentioned time and again,” he said.
Last month, he had a meeting with public, private cooperative banks.
Talking about the meeting with the MSME sector on Monday, Das said the purpose was mainly to interact and to get their views about the current state of functioning of the MSME and the implementation of the restructuring scheme which the RBI has announced earlier.
“It was a good interaction I had. I had a two-hour interaction with the MSMEs. I have noted down the points mentioned by them and we will examine them internally … I think the mood among MSMEs is certainly quite confident. Many of the points that they have mentioned are in the domain of the government,” he said.
While issuing a circular for MSMEs last week, the RBI asked banks to look at the viability of individual entity before restructuring loans.
To help the MSME sector facing a cash crunch, the RBI last week permitted one-time restructuring of existing debt up to Rs 25 crore for companies that have defaulted on payment but the loans given to them have continued to be classified as standard assets.
The effort is to see that maximum number of units get the benefit keeping in the mind the viability aspect, Das said.
“So, banks have been asked to place the matter before the board and come out with guidelines to examine the viability of individual proposals and also monitoring of the performance of such restructured assets and units. We do hope that banks and MSME units will work together to see that the scheme is implemented in letter and spirit in a way that maximum units benefit,” he said.
Among others, industry chamber CII and Assocham participated in the meeting.
A centralised loan application portal for all banks needs to be developed and an outside expert should be part of initial discussions with the borrower were among various suggestion made to Assocham in the meeting.
The Turn Around Time (TAT) for requests for sanction or enhancement of limits for working capital or term loans to be fixed basis the product and amount of loans up to a specified amount, CII said.