Government and RBI will respond swiftly to the unfolding global financial crisis, Finance Minister P Chidambaram said today.
The Finance Minister's statement was read out by Finance Secretary Arun Ramanathan here. Following is the text of Chidambaram's statement.
"On Wednesday, the Cabinet reviewed the financial situation in India and authorised me to issue a statement on behalf of the Cabinet/Government. We have identified that the main problem is liquidity, and we have assured the people that we will respond swiftly and take steps to infuse more liquidity according to the needs of the situation. Reserve Bank of India was advised to take appropriate steps in this behalf.
Following the cut in the CRR by 50 basis points announced on Monday, October 6, 2008, the RBI has, this morning, announced a further reduction in the CRR by 100 basis points, thus making a total reduction of 150 basis points. I welcome the decision of the RBI. The Governor, RBI has also assured the Government that the RBI is keeping a close and continuous watch on the situation and will take appropriate steps according to the evolving situation.
Meanwhile, I have received a number of representations from banks, other financial entities/intermediaries, corporates and small businesses that the issue of liquidity must be addressed in a comprehensive manner. They have impressed upon me that intermediation of credit must take place smoothly and efficiently.
I have, therefore, decided to constitute a group to make a quick assessment of the requirements of liquidity and advise the Government. The group will be headed by Shri Arun Ramanathan, Finance Secretary and Secretary (Financial Services). It will consist of:
(i) Representative of RBI
(ii) Shri TS Narayanaswamy, Chairman, IBA & CMD, Bank of India
(iii) Shri U.K. Sinha, CMD, UTI
(iv) Shri Y. M. Deosthalee, CFO, L&T & Director in-charge, L&T Finance Limited
(v) Shri R.M. Malla, CMD, SIDBI
The group has been authorised to co-opt any more members, if necessary.
I have requested the group to begin work immediately, also visit Mumbai, and submit an interim report within a week.
I wish to draw attention to the statement made by Mr. Robert Zoellick, President, World Bank that "India is in a position to weather the global financial turmoil". I also wish to draw attention to the statement of Mr H Kuroda, President, ADB that "the impact on the financial sector in Asia is limited this time".
Credit is the lifeline of trade, commerce and business and, hence, it is important that credit continues to flow to all sectors of the economy. In consultation with RBI and other regulatory authorities, Government will address the liquidity and other concerns about the economy.
It is also important to maintain our confidence in the Indian economy. As the Cabinet noted on Wednesday, the fundamentals of our economy are strong and there are many indicators which affirm the sound fundamentals."