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Thursday, Dec 18, 2008
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Emphasis on financial stability: RBI

Oommen A. Ninan

MUMBAI: Even though the initial impact of global financial contagion in India has been limited for a variety of reasons, some impact has been felt through the credit, equity and the foreign exchange markets, the Reserve Bank of India stated on Wednesday.

“During the past year and a half, particularly during 2007-08 and April-October 2008, financial stability has occupied a centre stage in policy circles in the wake of ongoing global financial crisis with wide ramifications,” the RBI stated in its Report on Trend and Progress of Banking in India 2007-08.

“The global financial turmoil has reinforced the importance of putting special emphasis on preserving financial stability.”

The adverse global developments have led to moderation of growth in the industrial and services sectors in the first-half of 2008-09. In recent weeks, “the impact on liquidity and credit has also been felt.”

“The global financial situation described the worst since the Great Depression, continues to be uncertain and unsettled. At present it is difficult to speculate about the trajectory of global downturn and its consequent fallout for the Indian economy,” the RBI cautioned. The financial sector in India is sound and healthy, the RBI stated adding, Indian banks do not have financial exposure to the U.S. sub-prime assets.

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