Not necessary to activate countercyclical buffer at this point: RBI
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Based on review and empirical analysis of countercyclical capital buffer (CCyB) indicators, Reserve Bank of India (RBI) has been decided that it is not necessary to activate CCyB at this point in time.
The framework on the CCyB was put in place by the RBI in terms of guidelines in February 2015, wherein, it was advised that the CCyB would be activated as and when the circumstances warranted and that the decision would normally be pre-announced. The provision has not been used by the RBI since it was introduced in 2015.
As per the RBI, the aim of the CCyB regime is two-fold. Firstly, it requires banks to build up a buffer of capital in good times, which may be used to maintain the flow of credit to the real sector in difficult times. Secondly, it achieves the broader macroprudential goal of restricting the banking sector from indiscriminate lending in periods of excess credit growth that have often been associated with the building up of system-wide risk.
