RBI assures market of liquidity in case of ‘Brexit’

Uncertainty about the outcome has resulted in some amount of turbulence in global markets and India

Ashok Lavasa. Photo: Shiv Kumar Pushpakar

The Reserve Bank of India (RBI) has assured market of liquidity if necessary as fears of Britain exiting the European Union loom large.

“In the run up to the referendum in the United Kingdom on its continuing in the European Union (‘The Brexit’), uncertainty about the poll outcome has resulted in some amount of turbulence in global financial markets, including in India,” according to a statement from the central bank.

“The RBI is maintaining a close vigil on developments, and will take all necessary steps, including liquidity support, to ensure orderly conditions in financial markets.”

RBI governor Raghuram Rajan had said: “Brexit can be quite damaging if it happens.” However, he had added that RBI was prepared for curb any volatility and reiterated that the country has ‘plenty of reserves.’

‘No cause for alarm’

Our New Delhi Special Correspondent adds:

Admitting that Britain’s exit from the European Union would indeed affect markets like India, Finance Secretary Ashok Lavasa said that there was no cause for alarm in the event of such a development, and added that the country should learn how to cope with such externalities.

“The way the European market is structured, if there is any fragmentation, then it would certainly have an effect on economies that have dealings with that market,” Mr. Lavasa said at an event organised by the PHD Chamber of Commerce and Industry. “However, there is no need to be unduly alarmed. If it is happening, then we need to learn how to cope with such external factors.” Mr. Lavasa also defended the government’s GDP figures, saying that they were “quite credible”.

“Whoever has raised questions (about the veracity of the GDP numbers) has not come up with alternative numbers to the 7.6 per cent figure,” Mr. Lavasa said.