Consider the following statements about the Countercyclical Capital Buffer (CCyB): 1. The CCyB was introduced by the Reserve Bank of India (RBI) in 2015 under the Basel III framework, but has not been used so far. 2. The primary objective of the CCyB is to ensure banks maintain extra capital during economic downturns to support credit flow. 3. The credit-to-GDP gap is the main indicator for triggering the usage of the CCyB, though other supplementary indicators may also be considered. Which of the following statements is/are correct? |ForumIAS

[A] 1 and 2 only

[B] 1 and 3 only

[C] 2 and 3 only

[D] 1, 2, and 3

Answer: B

Notes:

Explanation:

Statement 1 is correct: The CCyB was introduced by the RBI in 2015 as part of the Basel III framework. However, it has never been activated so far, as conditions for its activation have not been met.
Statement 2 is incorrect: The primary objective of the CCyB is to ensure that banks build extra capital during periods of economic growth (not during downturns) to support credit flow during downturns. This helps in preventing excessive lending during economic booms.
Statement 3 is correct: The credit-to-GDP gap is the main indicator for determining when to activate the CCyB, although other supplementary indicators may also be used to assess the need for the buffer.

Source- ET

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