Chidambaram sees credit tightness, promises adequate liquidity

September 18th, 2008 - 3:07 pm ICT by IANS  

Lehman BrothersNew Delhi, Sep 18 (IANS) The collapse of Lehman Brothers can lead to some tightness in credit in India, but the government will provide coordinated funding where needed, Finance Minister P. Chidambaram said Thursday.”There is absolutely no need for apprehension as all our banks are very strong banks and public sector banks do not have any exposure to Lehman Bros,” he said.

Chidambaram also dispelled fears about the Tata-AIG joint venture in India adding that the Lehman case should not be compared with that of American Insurance Group (AIG).

“The insurance regulator’s chairman have spoken to the Tatas and have been assured that all payment obligations of Tata-AIG will be made,” he said.

He said the Tatas own 74 percent of the joint venture and the group has assured the insurance regulator, the Insurance Regulatory and Development Authority (IRDA), that the Indian joint venture is not facing solvency issues.

Chidambaram’s comments came as US authorities grappled with the financial crisis triggered by the collapse of merchant bankers Lehman Brothers.

On India’s economic growth, he said: “I still maintain my view that growth in fiscal 2008-09 will be close to 8 percent.”

Regarding the exchange rate of the Indian rupee, he said the government does not take any view on the exchange rate.

“The exchange rate is likely to move both ways, and as long as it moves both ways in an orderly manner, the government will not worry about it,” the minister said.

As for shoring up the rupee-dollar exchange rate, Chidambaram said the Reserve Bank of India (RBI) was the regulator and would take appropriate steps if and when needed.

“Our financial reforms are carefully calibrated. We do not take decisions without considering pros and cons. We will continue to pursue financial sector reforms.

“But we will do so with regard to context, and we will keep regulations a step ahead of innovation. As long as we do that, we do not think that financial sector reforms will cause us problems.” Chidambaram said.

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