Stimulus can stay till economy recovers, says IMF's Kochhar

Speaking at the “Global Banking: Paradigm shift” conference here, on Tuesday, IMF Deputy Director Asia-Pacific Kalpana Kochhar said any stimulus can be withdrawn only when the economy revives and the system can do without it.  It may be noted that as much as $18 trillion was infused by various governments across the world to revive the global economy. 

Chairing the post lunch session at three-day conference organised by FICCI-IBA combine on “Unlocking the potential amidst global turmoil” RBI Deputy Governor Usha Thorat said Indian financial sector has already brought into practice number of measures — even before global financial crisis – based on the principles that are now accepted internationally.  These included restrictions on leverage for banking and non banking institutions, stringent liquidity requirements, counter cyclical prudential measures and some items that were hitherto not recognised in Tier I capital abroad but now sought to be deducted internationally.

She pointed out it is only now – after the crisis – the financial sector internationally begun to recognise profits from sale of securitised assets to SPVs (special purpose vehicles) over life of securities issued, not reckoning unrealised gains in earnings or in Tier I capital.

She pointed out: “The challenge is to facilitate growth of the real sector through financial products and innovations subject to adequate safeguards and adoption of sound risk management policies.”

Earlier, inaugurating the conference, Union Minister of State for Finance Namo Narain Meena pointed out that the initial impact of global financial contagion in India on financial sector has been limited for a variety of reasons.