Reserve Bank to announce more steps for liquidity: Chidambaram

October 15th, 2008 - 2:15 pm ICT by IANS  

Manmohan SinghNew Delhi, Oct 15 (IANS) Reserve Bank of India Governor D. Subbarao is expected to announce more measures to ease the liquidity conditions in the economy after a review meeting with Prime Minister Manmohan Singh late Tuesday.Finance Minister P. Chidambaram, who was also present at the meeting, told reporters here Wednesday that it was also agreed at the meeting that credit to borrowers must be ensured at least to the extent of sanctioned amounts.

“The RBI governor is on his way to Mumbai and will work out the details of the measures agreed upon. I expect to be able to make a statement later in the afternoon,” the finance minister said.

“The prime minister reviewed the financial situation, with particular reference to the liquidity position. The developments in, and measures taken by, other countries were also reviewed.”

It was noted at Tuesday’s meeting, also attended by Planning Commission Deputy Chairman Montek Singh Ahluwalia, that inter-bank lending remained a constraint.

“It is also important to enhance the credit limits where borrowers require more credit,” he said, adding banks were able to access only Rs.35 billion from the special window of Rs.200 billion opened by RBI for liquidity to mutual funds.

He, nevertheless, added that that the call money rate - the rate at which banks borrow short-term funds from each other - was around 9 percent Tuesday and that Rs.625 billion has been accessed by banks under two tranches of the liquidity adjustment programme.

Prior to the review with the prime minister, the central bank governor met the finance minister and discussed the impact of steps so far and if there was a need for more measures to cushion India from the global financial crisis.

“Liquidity situation is comfortable. Everything is under control,” Subbarao told reporters after the meeting with the finance minister and key officials Tuesday evening at the North Block, the seat of India’s finance ministry.

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