08-02-2013, 11:49 AM
Global Financial Crisis: Causes, Consequences and India’s Prospects
Global Financial Crisis.ppt (Size: 1.6 MB / Downloads: 144)
Scheme of Presentation
Global Financial Crisis
Impact on India
Difference between US/Europe and India
RBI’s Policy Response and Impact
Lessons from the Crisis
Medium-term Issues and Challenges
Global Financial Crisis (1)
Proximate causes
Sub-prime lending
Originate and distribute model
Financial engineering, derivatives
Credit rating agencies
Lax regulation
Large global imbalances
Fundamental cause
Excessively accommodative monetary policy in the US and other advanced economies (2002-04)
Differences Between Financial Crisis in US/Europe and India (5)
India’s Approach to Managing Financial Stability (2)
Financial sector, especially banks, subject to prudential regulation
both liquidity and capital.
prudential limits on banks’ inter-bank liabilities in relation to their net worth;
asset-liability management guidelines take cognizance of both on and off balance sheet items
Basel II framework: guidelines issued.
Dynamic provisioning
NBFCs: regulation and supervision tightened - to reduce regulatory arbitrage.
Measures since Mid-September, 2008 (1)
Expanding rupee liquidity
Reduction in CRR (400 bps) & SLR (100 bps)
Special Repo window under LAF for banks on-lending to NBFCs, HFCs & MFS
Special Refinance to banks without collateral
Unwinding of MSS – buyback/desequestering
OMOs – pre-announced calendar
Cut in repo (425 bps) and reverse repo (275 bps) rates.
Existing instruments – enough flexibility
MSS and CRR – good, effective buffers of liquidity – both absorption and injection