Economy gets Rs 65,000 cr booster dose from RBI, FM
Indian financial system got a liquidity shot of Rs 65,000 crore to combat the ripple effects of the global crisis with Finance Minister and RBI promising more steps, if needed.india Updated: Oct 15, 2008 20:53 IST
Indian financial system today got a liquidity shot of Rs 65,000 crore to combat the ripple effects of the global crisis - on top of Rs 80,000 crore infused since last week - with Finance Minister P Chidambaram and RBI promising more steps, if needed.
Reserve Bank announced a 100 basis points cut in cash reserve ratio, the mandatory cash deposits banks are needed to keep with the central bank, and also announced immediate release of Rs 25,000 crore as first tranche under the farm debt waiver scheme.
As global financial giants continued to falter, Chidambaram sought to further strengthen the Indian banks by promising support to them to access more funds to raise their capital adequacy ratio to 12 per cent from 10-12 per cent currently, although it is already substantially higher than 8 per cent stipulated under BASEL norms.
As part of efforts to bring in foreign funds, he doubled to 6 billion dollars the investment limit in corporate bonds by FIIs, whose withdrawal from Indian bourses had triggered the domestic stocks meltdown creating a near panic situation.
The joint efforts of Chidambaram and RBI Governor D Subbarao came a day after Prime Minister Manmohan Singh held a review meeting with them to explore further steps to bring stability and end the credit crunch, even as BSE tanked nearly 700 points reversing the positive trend seen since Monday.
Today's CRR cut, the third announced since October 6, would infuse Rs 40,000 crore of liquidity into the system. The previous cuts worth 150 basis points, which RBI had revised on October 11 from a reduction of 50 basis points announced on October 6, were aimed at releasing Rs 60,000 crore liquidity.