With reference to countercyclical capital buffers CCyB consider following statements RBI announced t...........

Economic Affairs Money Supply and Monetary Policy

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With reference to countercyclical capital buffers (CCyB), consider following statements

RBI announced that banks don’t need to activate countercyclical capital buffers (CCyB) for one more year, which means the banks can utilize the capital for further credit.
The framework on countercyclical capital buffer (CCyB) envisages the credit-to-GDP gap as the main indicator, which is used in conjunction with other supplementary indicators.

Select the correct statement.

1 only

2 only

Both

None

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Explanation:

The central bank said the framework on CCyB was put in place under the guidelines issued on 5 February, 2015. It had said CCyB's activation would depend on the circumstances warranted. “Based on the review and empirical analysis of CCyB indicators, it has been decided that it is not necessary to activate CCyB for a period of one year or earlier, as may be necessary.Now the bank utilize this buffer capital for further credit.
The framework envisages the credit-to-gross domestic product (GDP) gap as the main indicator, used in conjunction with other supplementary indicators, RBI said. It requires banks to build up a buffer of capital in good times, which may be used to maintain flow of credit to the real sector in difficult times. The buffer was also meant to restrict the banking sector from indiscriminate lending in the periods of excess credit growth, which have often been associated with the building up of system-wide risk.