RBI and Sebi's move to calm investors comes after Sensex crashed nearly 1,500 points over a rumoured default by DHFL and uncertainty surrounding the future of IL&FS
Mumbai: India’s banking and markets regulators issued a rare joint statement late on Sunday, stating that they are closely monitoring the financial markets and will take appropriate steps, if required, to ensure their smooth functioning. “The Reserve Bank of India and the Securities and Exchange Board of India are closely monitoring recent developments in financial markets and are ready to take appropriate actions, if necessary," the statement said.
State Bank of India chairman Rajnish Kumar also stepped in to reassure investors on Sunday, saying that there was no concern related to liquidity at mortgage lenders. Friday’s slump in the stocks of home financiers was attributed to fears of liquidity tightness and potential systemic risk arising from exposure to IL&FS.
The regulators seem to be concerned about linkages between various financial institutions in the system and whether any defaults, real or rumoured, can lead to the possibility of a systemic contagion. The intricate interlinkages in the financial system render all agents vulnerable in case of a default by a single player. This systemic risk can bring the entire financial system to a halt.
IL&FS has also asked the government to clear dues worth as much as ₹ 16,000 crore for work completed by the company. IL&FS has hired SBI Capital Ltd to find an investor for a majority stake in unit IL&FS Financial Services, the report said. On 17 September, rating agency ICRA downgraded the credit rating of IL&FS to default.
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