Prime Minister Manmohan Singh conferred with Finance Minister P. Chidambaram and Reserve Bank governor Duvvuri Subbarao on Tuesday as they plotted steps to perk up nervous banks strapped for cash.
A slew of measures were expected later this week to help banks go ahead with stalled lending programmes to boost the economy after steps to infuse confidence.
No official word came on details of the meeting that followed reassuring statements to depositors, lenders and borrowers by the policy-makers earlier in the day. The Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, and Finance Secretary Arun Ramanathan, who is heading a panel to suggest liquidity boosters, joined the meeting.
With the RBI having sucked off rupees by selling US dollars to cool the currency demand in the wake of the global
financial crisis, Subbarao had met Chidambaram earlier in the day to explore further options. “We have reviewed the situation. (It) is quite comfortable,” the RBI Governor said.
“We believe everything is under control. I cannot tell what measures are going to come. We have done everything... to be done.”
Apart from cutting the mandatory cash deposit requirements for banks by 1.5 percentage point last week, RBI has also offered
Rs 20,000 crore for mutual fund industry to enable it handle redemption pressures.
Chidambaram said global measures had infused market confidence to a “significant degree,” referring to government steps in the West to buy up stakes in crisis-ridden banks.
A cut in the repo rate is also expected when Subba Rao presents mid-year monetary policy review on October 24.