Question

    Which is the main indicator, the breach of which, would

    activate the Counter-Cyclical Capital Buffer? 
    A Credit to Deposit Gap Correct Answer Incorrect Answer
    B Credit to GDP Gap Correct Answer Incorrect Answer
    C Credit to GNP Gap Correct Answer Incorrect Answer
    D GDP to Credit Gap Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    The credit-to-GDP gap155 shall be the main indicator in the CCCB framework in India. However, it shall not be the only reference point and shall be used in conjunction with GNPA growth. The Reserve Bank of India shall also look at other supplementary indicators for CCCB decision such as incremental C-D ratio for a moving period of three years (along with its correlation with credit-to-GDP gap and GNPA growth), Industry Outlook (IO) assessment index (along with its correlation with GNPA growth) and interest coverage ratio (along with its correlation with credit-to-GDP gap). While taking the final decision on CCCB, the Reserve Bank of India may use its discretion to use all or some of the indicators along with the credit-to-GDP gap.

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