Mumbai. Reserve Bank of India (RBI) Deputy Governor Swaminathan J has compared central banks to cricket wicketkeepers or football goalkeepers, saying that they often remain unseen in times of success but are always in the headlines during failures.
Swaminathan said in a conference organized on the topic ‘Central Banking at the Crossroads’ on Monday that the role of central banks has evolved a lot in the last few years. He said that central banks, which were initially seen as the lender of last resort, are today equipped with a variety of instruments – regulatory, supervisory and monetary policies – to ensure the stability of the financial system.
The Deputy Governor said that the financial sector is the backbone of the economy which ensures efficient allocation of resources, management of risks through various instruments and smooth payments and settlements. It performs important functions that support investment and accelerate economic growth. He said that in such a situation the financial sector becomes the cornerstone of a well-functioning economy. However, the financial sector is vulnerable to risks, especially systemic risks, which, if left unchecked, can have far-reaching consequences.
Swaminathan said that while financial risks may increase over time, especially during periods of economic euphoria, the growing interconnections between financial institutions, markets and the broader economy make the system more vulnerable to shocks. He said, “Firmness is important to maintain financial stability in this volatile environment. However, showing belligerence is a balancing act. “Too much emphasis on security can stifle innovation and growth, while too little attention can weaken the financial system.”
Swaminathan said that finding the right balance is one of the major challenges of today. He said, “In fact, central banks are like wicketkeepers of cricket or goalkeepers of football. At the time of success, no one often pays attention to him, but at the time of failure, he is always in the headlines.
A senior RBI official said, “When everything goes smoothly, their efforts remain behind the scenes. But when there is a crisis, they are asked how they can let the ball go. “In addition, central bankers are also tasked with preventing further losses and quickly restoring stability.” Swaminathan said the Financial Stability and Development Council (FSDC) chaired by the Union Finance Minister and its sub-committee chaired by the RBI Governor are effectively facilitating discussion and better understanding of the risks in the financial sector.