Financial crisis behind us, but normalcy yet to restore: Reddy
Financial crisis is more or less behind us but normalcy has not been restored and there could be possible serious problems related to global liquidity, former Reserve Bank Governor Y V Reddy said on Friday.business Updated: Nov 27, 2009 21:05 IST
Financial crisis is more or less behind us but normalcy has not been restored and there could be possible serious problems related to global liquidity, former Reserve Bank Governor Y V Reddy said on Friday.
"Crisis and threat of collapse going away does not mean that there is normalcy," he told reporters on the sidelines of the global launch of Warwick Commission Report on International Financial Reforms in New Delhi on Friday.
"The point that you have averted a crisis ... a collapse, does not mean you have restored normalcy," Reddy said.
On the opposite, he said the huge stimulus and liquidity pumped in economies across the world during the credit crisis
could pose serious problems for many countries.
"There is so much of stimulus hanging around, so much of public money injected into banks in various countries,
specially if you see the western banking system," he said.
There is huge government capital lying and, in certain countries, "central bank balance sheets are bloated", he said.
"The judgement globally is that capital inflows on account of global liquidity in developed economies could be a serious policy problem," he said.
On timing of exit from stimulus, he said it would depend on individual countries, how financial markets behave and based on global developments. However, start of exit should happen with the unconventional measures, he said.