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MUMBAI: The Reserve Financial institution on Tuesday mentioned it has determined to not activate the countercyclical capital buffer at this cut-off date as it’s not required.
The framework on the countercyclical capital buffer (CCyB) was put in place by the Reserve Financial institution when it comes to tips in February 2015 whereby, it was suggested that the CCyB could be activated as and when the circumstances warranted and that the choice would usually be pre-announced.
The framework envisages the credit-to-GDP hole as the primary indicator, which can be used along side different supplementary indicators.
“Based mostly on the assessment and empirical evaluation of the CCyB indicators, it has been determined that it’s not essential to activate CCyB at this cut-off date,” the central financial institution mentioned in an announcement.
The credit-to-GDP hole shall be the primary indicator within the CCCB framework in India.
As per the RBI, the intention of the CCyB regime is two-fold.
Firstly, it requires banks to construct up a buffer of capital in good occasions, which can be used to take care of the circulate of credit score to the actual sector in troublesome occasions.
Secondly, it achieves the broader macroprudential aim of proscribing the banking sector from indiscriminate lending in intervals of extra credit score progress which have usually been related to the build up of system-wide danger.
Within the backdrop of the 2008 international monetary disaster, the Group of Central Financial institution Governors and Heads of Supervision (GHOS), the overseeing physique of the requirements set by the Basel Committee, had envisaged the introduction of a framework on countercyclical capital measures.
The framework on the countercyclical capital buffer (CCyB) was put in place by the Reserve Financial institution when it comes to tips in February 2015 whereby, it was suggested that the CCyB could be activated as and when the circumstances warranted and that the choice would usually be pre-announced.
The framework envisages the credit-to-GDP hole as the primary indicator, which can be used along side different supplementary indicators.
“Based mostly on the assessment and empirical evaluation of the CCyB indicators, it has been determined that it’s not essential to activate CCyB at this cut-off date,” the central financial institution mentioned in an announcement.
The credit-to-GDP hole shall be the primary indicator within the CCCB framework in India.
As per the RBI, the intention of the CCyB regime is two-fold.
Firstly, it requires banks to construct up a buffer of capital in good occasions, which can be used to take care of the circulate of credit score to the actual sector in troublesome occasions.
Secondly, it achieves the broader macroprudential aim of proscribing the banking sector from indiscriminate lending in intervals of extra credit score progress which have usually been related to the build up of system-wide danger.
Within the backdrop of the 2008 international monetary disaster, the Group of Central Financial institution Governors and Heads of Supervision (GHOS), the overseeing physique of the requirements set by the Basel Committee, had envisaged the introduction of a framework on countercyclical capital measures.
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