Financial Markets and the Economy - Intersections

( The enclosed article appeared on CNBC TV18 online on February 20, 2020, per link below: https://www.cnbctv18.com/views/money-creation-and-rbi-how-the-central-bank-modulates-banking-liquidity-explained-5332721.htm  ) Money Creation & RBI – An Explainer In an earlier note (see “How the banking system works & money is created – an explainer”, published on January 28, 2020 on CNBC TV18), we had explored banking liquidity and credit creation from the perspective of the banking system. We now explore questions relating to the Reserve Bank of India (RBI). Does a Cash Reserve Ratio (CRR) requirement control money creation? How do Basel liquidity and capital stipulations impact economic activity? Does the RBI need to regularly inject liquidity to support credit creation and economic growth? What tools does the RBI have to modulate banking liquidity, and what constitutes ‘deficit monetization’? A Recap Let’s start with a quick recap of the arguments of the pre...

( The following article appeared in Bloomberg Quint on February 10, 2020, per the link below https://www.bloombergquint.com/opinion/our-experiments-with-truth  ) Our experiments with truth For a nation that has adopted “Satyameva Jayate” – truth alone shall prevail – as its motto, we have trouble dealing with the truth. We are yet to acknowledge the full extent of non-performing assets in our financial services ecosystem. We skirt around the truth in our budget math. We publicly applaud reforms such as Uday, Sashakt, Samadhan and bank consolidation, but privately complain that these are just not enough.  Some would argue that truth is overrated, or even dangerous. I make the case that truth – particularly around the state of our financial services and public finances – can show us the way to achieving our immense economic potential.   The truth about asset quality As far back as in 2012, Credit Suisse showed that many of the large infrastruc...