The framework provides the GDP credit gap such as the main indicator, which can be used together with other complementary indicators. | Photo credit: Francis Mascarenhas
The Bank of the Reserve of India (RBI) said Tuesday that it is not necessary to activate the countercyclical capital shock absorber (CCyB) for banks at this time.
The objective of the CCyB regime is double. First, it requires that banks accumulate a capital shock absorber in the good times that can be used for Mintain credit flow for the real sector in difficult times.
Secondly, it achieves the broader macro-power objective of restricting the banking sector of the indistraiminated loan in the periods of excessive credit that have often been associated with the construction of the risk of the entire system.
The CCyB framework was in place by the Bank of the Reserve in terms of the guidelines issued on February 5, 2015, where it was reported that the buffer would be activated as and while the circumstances justified, and that the decision of normality would be previously announced.
The framework provides the GDP credit gap such as the main indicator, which can be used together with other complementary indicators.
“According to the review and empirical analysis of the CCyB indicators, leg has decided that it is not necessary to activate CCyB at this time,” said RBI.
If CCyB is activated, you can slow down credit, which in turn will affect GDP growth, bank experts say. Not activating this shock absorber, the RBI ensures that there are no obstacles in the flow of credit to the productive sectors of the economy.
Posted on April 15, 2025