RBI monetary policy: Government-RBI jugalbandi playing out well, says SBI MD – The Economic Times

Clipped from: https://economictimes.indiatimes.com/markets/expert-view/government-rbi-jugalbandi-playing-out-well-says-sbi-md/articleshow/80708106.cmsSECTIONSGovernment-RBI jugalbandi playing out well, says SBI MDByMythili Bhusnurmath,ET NowLast Updated: Feb 05, 2021, 05:28 PM ISTSynopsis

NBFCs play a very critical role as far as the economy is concerned and maybe banks are better at passing on liquidity, says Ashwani Bhatia

Ready to provide liquidity to NBFCs that meet SBI criteria, says Ashwani Bhatia, MD, SBI

What do you make of this jugalbandi between the government and the RBI? The RBI as well as the government are both clearly going for growth as we come out of Covid19?
You always need to have a good jugalbandi when you are running an economy. If somebody is playing the sitar or santoor or sarod, you need a very good tabalchi to play along all the time. The beautiful thing that has happened in our economy is that over the last year, RBI did all the heavy lifting that was required from the financial markets — liquidity, CRR, SLR. This week, we had a budget which was expansionary in nature. It was also necessary that the Reserve Bank of India delivered and the fact that the policy is accommodative means there is not much disruption. TLTRO tap is there for NBFCs; the fact that whatever goes to SMEs can be deducted from the NDTL — all these factors are positive for the financial markets.

While the TLTRO on tap announcement for NBFCs is being welcomed by the NBFC sector, now the banks have to ensure that the money is being lent to NBFCs as well. How willing are banks going to be?
Banks are willing and our experience last year has been very good. The measures that were announced by the government where they initially guaranteed bonds worth Rs 30,000 crore. All that money was returned without any default and we should trust our industrial houses and our NBFCs. We remain ready to provide liquidity to NBFCs that meet our criteria.

Given that one of the major reasons for any kind of contagion and possible financial instability is the interconnectedness between banks and NBFCs, is the RBI going further down the road by introducing more LTROs?
Well you know the condition of Indian markets. Our markets are not that developed and so where do NBFCs go? The customers or the retail depositors have trust in the banks, liquidity is with us and that liquidity has to go back to the NBFCs in some form. They play a very critical role as far as the economy is concerned and maybe banks are better at doing that job. I just hope that the markets develop over a period of time.

RBI is allowing retail investors to buy G-secs and hold accounts for that with RBI directly. What kind of appetite will there be among retail investors for Gsecs?
So first I will just come back to what you talked about funding NBFCs. Although RBI has given this dispensation for a TLTRO, at the same time, it has tightened regulations and has been proactive on that account. and the discussion paper that we saw a few days back clearly points to that. Coming to your question on retailers buying G-secs, I think it is a very open-ended thing and the comfort of a depositor with the bank is that he can walk with the bank anytime, deposit money, take a loan against it and withdraw it any moment. It remains to be seen what kind of regulations come out. Potentially, the volumes could be huge and if you ask me, it will also take away some load from the banks in the sense that the deposits may come down a bit, It will take away CRR, SLR but it is worth experimenting if you ask me.

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