New Delhi: Assuring that the central bank will adopt adequate liquidity whenever the need arises, RBI Governor Shaktikanta Das on Monday noted that the liquidity should not become “loose money”. Das made the remarks ahead of his meeting with NBFCs in Mumbai on Tuesday to discuss the prevailing liquidity issues.
The Reserve Bank of India has “a sense” of the current liquidity situaiton and after his appointment as its Governor has announced additional infusion of liquidity via open market operations (OMOs) of Rs 60,000 crore, Das said here on Monday after meeting the representatives of Micro, Small and Medium Enterprises (MSMEs).
“While dealing with the issue of liquidity, I would also like to say that it is something which the RBI is constantlyy monitoring and will take steps whenever there is a need to deal with the liquidity deficit, if it is noticed.
“… At the same time I must also add the RBI would not like a situation where liquidity becomes a kind of a loose money. Any infusion of liqidity will have to be very carefully considered and has to be need-based. So, the caution and care has to be excercised by the RBI, that excess liquidity which sometimes has adverse consequences that is not created,” he added.
Das further said that he will meet the representatives of Non-banking Financial Companies (NBFCs) on Tuesday in Mumbai.
Das also noted that generalised farm loan waiver adversely impacts the credit culture and the behaviour of borrowers, amid various state governments announcing waivers.
The statement assumes significance in view of three newly elected state governments implementing farm loan waivers in their states in pursuance of poll promises.
When asked about his views on loan write-off for farmers by state governments, he said farm loan waiver is related to the fiscal space that a particular state government has.
“Elected governments have the constitutional mandate to take decisions with regard to their finance but every state government, before taking decisions on any kind of farm loan waivers, has to very carefully examine its fiscal space,” he said.
“It’s also for the individual governments to examine whether they have the fiscal space to meet the requirements and release the money to the banks immediately. Any generalised kind of write-off obviously has adverse effect on the credit culture and the future credit behaviour of the borrowers,” he said.
About Rs 1.47 lakh crore of agricultural loans are outstanding in Madhya Pradesh, Rajasthan and Chhattisgarh, which announced waivers recently.
(With inputs from agencies)