RBI vigilant on US sub-prime crisis
The Reserve Bank will wait and watch as the US turmoil as it could weigh heavily on future stability of financial markets and could have a wider impact on global growth with particular concerns centred on EMEs.
MUMBAI: The Reserve Bank will "wait and watch" even as it keeps a vigil on the US sub-prime mortgage crisis that could impact emerging economies like India, a top apex bank official said.
"As central bankers, we will have to enhance our vigilance...we have to wait and watch," RBI Deputy Governor Rakesh Mohan said, touching upon the sub-prime crisis at the Asian regional conference here.
"Recent financial markets developments are indicative of evolving uncertainties for EMEs with significant challenges for the conduct of monetary policy and for ensuring financial stability in their economies."
The adverse consequences of the US turmoil could weigh heavily on future stability of financial markets and could have a wider impact on global growth with particular concerns centred on EMEs, he said.
"If credit conditions tighten, EMEs could become particularly vulnerable to reversals of capital flows with serious implications for their future prospects. A slowing down of the US economy, in combination with capital reversals, could also have adverse consequences for growth," he said.
On the other hand, the flight of capital to safety through diversification could even enhance capital flows to these countries, he added.
The Deputy Governor, however, expected that the fallout from the US sub prime crisis was likely to be limited for Asian banks and could easily be accommodated within their current rating positions.
"As central bankers, we will have to enhance our vigilance...we have to wait and watch," RBI Deputy Governor Rakesh Mohan said, touching upon the sub-prime crisis at the Asian regional conference here.
"Recent financial markets developments are indicative of evolving uncertainties for EMEs with significant challenges for the conduct of monetary policy and for ensuring financial stability in their economies."
The adverse consequences of the US turmoil could weigh heavily on future stability of financial markets and could have a wider impact on global growth with particular concerns centred on EMEs, he said.
"If credit conditions tighten, EMEs could become particularly vulnerable to reversals of capital flows with serious implications for their future prospects. A slowing down of the US economy, in combination with capital reversals, could also have adverse consequences for growth," he said.
On the other hand, the flight of capital to safety through diversification could even enhance capital flows to these countries, he added.
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The Deputy Governor, however, expected that the fallout from the US sub prime crisis was likely to be limited for Asian banks and could easily be accommodated within their current rating positions.
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