RBI promises liquidity support post Brexit: Rajan

The Dollar Business Bureau

Reserve Bank of India (RBI) Governor Raghuram Rajan on Friday said that the bank would provide liquidity in the market and correct any disorderly behaviour of the market, after the UK’s vote to leave the European Union (EU). He said that after early investor concerns over Brexit, investments should return to the country.

The RBI Governor expressed his concerns and said that he was worried about currency intervention by countries to create a competitive advantage and requested the central banks around the globe not to cause devaluation of currencies. He said, “Markets around the world are trying to factor the impact of the Brexit vote, leading to sharp changes in financial markets. However, India’s economy has strong fundamentals, significant foreign exchange reserves and low short-term external loans, which should make the country stand firmly in the days to come.”

Assuring the people of  RBI’s extra vigilance given the prevailing situation, he said RBI is constantly keeping a close watch on the developments in the market, domestically as well as internationally. The bank will take all necessary measures, to make sure that orderly conditions prevail in the financial markets.

“As of now, all the markets seem to be working and if there are disruptions in the markets and liquidity is not available from certain quarters, we are fully ready to provide whatever liquidity is needed, both dollar as well as rupee liquidity,” Rajan said while speaking to reporters.

On the impact of Brexit on India’s outflows, Rajan said that the country should not see any major outflows of funds as it has relatively better fundamentals than other economies. Speaking on GST he said, there would not be foreign selling if India keeps going ahead with reforms such as GST, and foreign investors remain reassured on the country’s growth prospects. As all are interconnected, volatility goes through every market, and it is obvious that some concerns will move from one market to another. However, he thinks that in these times, it is vital to note that India is less exposed to external factors as compared to many other nations.