While we all are aware about the monetary policy measures and liquidity support to the banking system along with targeted operations aimed towards supporting NBFCs, MSMEs, MFIs, among others, let me focus a bit on the levers of the prudential regulations which became enablers for extending relief to a large spectrum of individuals, small business, and industries. Calibrated Prudential Response 5.
Investors therefore felt that banks had either over-valued their assets, would not achieve the expected rate of return, or needed more capital. This kind of uncertainty has a negative impact on banks’ funding costs, which in turn are fundamental to the terms on which banks can on-lend to the real economy. The task, therefore, is to restore investor confidence.