They show that the genesis of the crisis was a run on the “repo” market. This market is as vulnerable to a run as an unsecured funding. This is especially the case when the collateral is of a lower quality and markets are illiquid. 29. The RBI has therefore adopted a cautious approach in its regulation of repos in corporate bonds.
The elevated rate of unemployment continued tight lending conditions and a need to address weaker household balance sheets are expected to continue to impact consumption expenditure negatively. Also, on average, the credit standing of consumers has continued to deteriorate. I have briefly highlighted the key issues raised in the Financial Stability Review.