As a result, we, in India, are in a happy situation where banks have a common equity to total assets ratio of more than 7% which is already “more-than- twice” Basel III compliant on this critical parameter. Significantly, recently again, to contain potential systemic liquidity risk, the Reserve Bank has capped banks’ investments in Fixed Income Mutual Funds to 10% of their net worth.
I now turn to what I said before, in the paragraph 6, about how monetary policy tool can also be deployed alongside the counter-cyclical prudential regulatory measures as a complementary companion tool to credibly, effectively and decisively address the build-up of systemic financial risks.