Shaktikanta Das said RBI would take steps to address any deficit in banking systemNew Delhi:The Reserve Bank of India (RBI) is open to infusing "need-based" liquidity into financial system, Governor Shaktikanta Das said on Monday ahead of a meeting with shadow banking sector, which has been hit hard by a funding crunch.Government officials have pressed RBI over past few months to ease lending and capital rules for banks and provide more liquidity to shadow banks.They have also urged RBI to step up lending support for small businesses and allow government to use more of central bank's surplus reserves to boost economy.Mr Das said RBI constantly monitors liquidity conditions and would take steps to address any deficit in banking system.
But he said it was also keen to prevent creation of excess liquidity."The Reserve Bank would not like a situation where liquidity becomes kind of loose money," he told reporters in Delhi.
"Any infusion of liquidity will have to be very carefully considered and has to be need-based."He said central bank would meet representatives of non-banking financial institutions (NBFCs) in Mumbai on Tuesday.Defaults by big NBFC Infrastructure Leasing Financial Services (ILFS) on some of its debt obligations late last year triggered declines in stock and debt markets, and led to concerns about broader risks in financial sector."There has been a lot of discussion and a lot of views have been expressed about issue of liquidity faced by NBFCs," Mr Das said."So in tomorrow's meeting we will utilise opportunity to get a perspective from NBFCs."He also said RBI was considering governance reforms for state-owned banks, which dominate banking sector with over two-thirds of its assets."Governance reforms are an important component of revival of public sector banks," he said.
"There is definitely improvement noticed in reduction of non-performing asset levels of banks as a whole and public sectors in particular."But he added "improvements will have to be sustained if banks have to fulfill their responsibilities".