The Reserve Bank of India nixed hopes of any special liquidity window for non-banking finance companies — a key government demand to keep the economy humming — arguing that there is adequate liquidity in the system.

But it promised to open the spigot when necessary.

The central bank pulled out a laundry list of measures it has taken to ensure that interest rates don’t spike and said it is driven by systemic issues rather than specific segments which may have been facing difficulties due to poor management. Accelerating investments and credit growth rate, which is higher than the nominal economic growth rate, are signs of strength rather than weakness that warrants bailout schemes, said governor Viral Acharya. “RBI is guided by the principle of addressing system-wise liquidity,” Acharya said .

“RBI also stands ready to be the lender of the last resort, provided the condition warrants that sort of extreme measure.

Our assessment shows there is no such necessity at present, given the sound health of the economy.

We are at the level of aggregate credit growth, which is comfortably in excess of nominal GDP growth.” A special liquidity window for NBFCs is at the centre of a rift between RBI and the government after defaults by Infrastructure Leasing Financial Services led to a credit market squeeze.

While there has been no default by other major NBFCs, they are forced to roll over short-term commercial paper borrowings and shift to longer-term debt to adjust assets to liabilities. Acharya said that the banking regulator has been in regular touch with market watchdog the Securities and Exchange Board of India (Sebi) to access the fallout of mutual fund redemption and rollover risk for NBFCs and housing finance companies.

RBI has also taken a slew of measures to improve cash flows for NBFCs. It allowed banks to provide partial credit enhancement on bonds raised by NBFCs and HFCs, helping raise credit quality of bonds.

It has also relaxed securitisation rules to allow the risk to be transferred to better funded bank balance sheets.

“Our assessment is that these measures have collectively eased funding stress in a steady manner over the past two months.

We have given NBFCs and HFCs time and the opportunity to make own adjustment on both asset and liability side, in particular in the duration structure of liabilities,” Acharya said. RBI injected cash in the system by buying government bonds worth Rs 36,000 crore in October and Rs 50,000 crore in November, taking the total to Rs 1.36 lakh crore this fiscal.

Liquidity injected under daily liquidity adjustment facility on an average daily net basis was Rs 56,000 crore in October, Rs 80,600 crore in November and Rs 10,500 crore in the first four days of December. “The weighted average call rate continues to remain soft and below the policy rate on average.

possible because of various liquidity tools,” said Acharya.

RBI promised to increase frequency and quantum of open market operation till march and plans to conduct long term repo auctions to tide over advanced tax outflows.