NBFC Crisis Tops Agenda In Meeting Between Government, Regulators
The liquidity crunch faced by non-banking lenders overshadowed other discussions at the meeting of Fiscal Development and Stability Council today.
Government representatives told representatives of the Reserve Bank of India that the liquidity crunch shouldn’t have a spillover effect on other sectors, a government official told reporters. The meeting was attended by Finance Minister Arun Jaitley, RBI Governor Urjit Patel, among other officials.
The council has the finance minister as its chairman and all financial regulators as members. Its objective is to strengthen and institutionalise the framework for maintaining financial stability, enhancing inter-regulatory coordination and promoting financial sector development.
The council discussed current liquidity situation, including segmental liquidity position in NBFCs and the mutual fund space, according to a Finance Ministry statement.
The RBI assured that it’s closely watching the developments in the NBFC sector and that there’s no liquidity “crisis” as of now, the official said, adding that it has also promised to maintain adequate liquidity in the system. This was corroborated by the ministry statement, which said “the Council decided that the regulators and the government would keep a close watch on the developing situation and take all necessary measures”.
Patel was accompanied by all four deputy governors—Viral Acharya, MK Jain, BP Kanungo and NS Vishwanathan—who aren’t members of the council but were special invitees as discussions on some subjects required their expertise, said a senior finance ministry official.
A discussion on cybersecurity in the banking system figured in the meeting as well, the official said. The council, according to the statement, reviewed the progress made towards setting up of a Computer Emergency Response Team in the Financial Sector (CERT-Fin). Cert-Fin will be an independent body that will work closely with all financial regulators on issues of cybersecurity, the statement said.
The council also had a discussion on challenges of cryptocurrencies and was briefed about the deliberations of the panel chaired by the Economic Affairs Secretary Subhash Chandra Garg on regulating cryptocurrencies. The panel has been tasked with devising an appropriate legal framework to ban cryptocurrencies in India and encourage the use of Distributed Ledger Technology, as announced in the Budget 2018-19.
Today’s meeting was the first between Patel and Jaitley ever since officials of the two institutions critiqued each other over their relations in the past week.