Policy Reponse of Central Banks across the world to Covid-19

Central Banks across the world have taken proactive steps to tackle the economic stress caused by Covid-19. These steps have included liquidity measures, lowering of interest rates, temporary relaxations in regulatory requirements for lending institutions. List of some important steps taken by central banks (till July 31st) of few major economies and India’s neighbours is presented below : Source: These steps have been compiled using data available on IMF’s website.

Its Gold to the rescue

World Gold Council estimates that India owns almost twenty-five thousand tonnes of Gold. This perhaps represents the largest stock of gold on earth and translates to thirteen percent of the total gold mined since the beginning of civilisation (Read more about the same here). In “fiat currency” terms the value of this gold stock equals USD 1.55 trillion i.e. more than 50% of India’s GDP. This equates to eighty percent of the total market capitalisation of all listed entities on […]

What constitutes monetisation of Debt ?

Monetisation of debt is a difficult concept to comprehend, as it is not clearly defined. It can occur through several practices that may be transparent, translucent, opaque or hidden. For long, monetisation of debt was understood as “converting government debt to money” or “the central bank’s purchase of government bonds when they are issued”. Either definition has its problems. Typically, the government can finance its deficits by printing money or issuing debt. The former directly attenuates monetary control. In the […]

“Risk Aversion Mode” is on amongst Debt Mutual Funds

Having witnessed a series of defaults including IL&FS, DHFL etc – debt mutual funds over the past eighteen months have been steadily increasing their exposures to government/quasi government entities. This trend has accelerated post the Franklin fiasco and Covid pandemic. In June, for the first time in recent times, overall debt mutual funds exposure to Government securities as percentage of debt AUM entered into double digits. Additionally, exposure to Treasury Bills also crossed two lakh crores for the first time. […]

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