IMF Global Financial Stability Note Urges Stronger Tools to Manage Liquidity Risks in Non-Bank Financial Intermediaries
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Institutions: Reserve Bank of India (RBI) | Ministry of Finance
Global Financial Stability Note No 2025/004 by the International Monetary Fund (IMF) examines growing liquidity stresses and market dysfunction in non-bank financial intermediaries (NBFIs), such as mutual funds, insurance firms, pension funds, and shadow banks. It argues that while central banks traditionally provide liquidity mainly via banks, recent crises have shown that many NBFIs also require support in times of stress.
Key policy tools discussed include expanding eligibility of counterparties, broadening the types of collateral accepted, extending the duration of central bank lending, and offering emergency liquidity facilities tailored for NBFIs. Robust regulation and supervision are emphasized as essential both to prevent excessive risk-taking and to ensure transparency in liquidity management.
NBFIs are financial institutions that do not have a full banking licence and therefore cannot accept traditional deposits from the public like banks do, but they still play a major role in credit, investment, and risk transfer
For India, where the non-bank financial sector has been growing fast and becoming deeply integrated with capital markets, these recommendations are relevant to safeguard financial stability, especially in volatile global conditions.
These ideas also matter because liquidity shocks in NBFIs can quickly propagate into broader markets, potentially threatening financial stability, hurting investors, and amplifying crises. Institutions like the RBI and Ministry of Finance must develop regulatory tools and emergency frameworks to manage these risks before they escalate.
Follow the full news here: Addressing Market Dysfunction and Liquidity Stresses in Nonbank Financial Intermediaries