RBI assures of adequate funds flow in system

The Reserve Bank of India (RBI) on Tuesday said there was no liquidity crisis in the non-banking financial companies, assuaging the government's concerns that a cash crunch in the shadow banking space could have a ripple effect through the wider economy.

The RBI told the government that there was no liquidity crunch at NBFCs and that there was actually some credit growth in the sector. The RBI said that it had taken no measure to tighten liquidity in the system, government sources said.

On Tuesday, the high level FSDC meeting chaired by Finance Minister Arun Jaitley discussed liquidity issues being faced by the non-banking financial companies, sources said.

Headed by the finance minister, the Financial Stability and Development Council (FSDC) includes Reserve Bank Governor, Sebi Chairman, and heads of other regulators like PFRDA, IRDAI, and also Chairman of the Insolvency and Bankruptcy Board (IBBI). RBI Governor Urjit Patel said the liquidity problem in NBFCs is not as severe as is being projected, but assured the government that it would ensure adequate liquidity in the system, sources said after the meeting.

The meeting assumes significance as FSDC is meeting for the first time after RBI Deputy Governor Viral

Acharya raised the issues regarding independence of the central bank. Unlike in the past, all the four RBI deputy governors attended FSDC meeting along with Patel.

Sources said the RBI governor informed the government that there is no liquidity crunch in the system, barring certain sectors and assured they are keeping a close watch on the financial sector.