Chidambaram assures adequate funds to stabilize liquidity crunch
10 Oct 2008, 2030 Hrs

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New Delhi, Oct.10 Union Finance Minister P Chidambaram on Friday assured the cash-strapped markets that Government will inject more funds into the system within 10-12 days through the supplementary demands for grants.

In an interview to private TV channel, he said, when the supplementary is passed by Parliament, a substantial amount of liquidity will be infused into the market.

Chidambaram said, between now and October 20 or so, if further steps are required to infuse liquidity, the RBI Governor will take those steps.

He also said that the flow of credit, smoothly and efficiently, through the system is vital for the stability of the financial system.

Replying questions on the safety of deposits with the banks, Chidambaram said, Indian banks are well capitalised and well regulated and there is no need to worry about deposits.

Commenting on the Index of Industrial Production, he said, the IIP numbers are not very satisfactory and at the same time they are not very reliable.

The Minister said, he has conveyed his concerns couple of months ago to the Ministry of Industry and repeated the same concerns again on Friday.

Stating that at this stage, it will be difficult to assess the impact of global developments on the macro economy, he said our economy would still grow at a very satisfactory rate.

RBI has already announced the decision to cut the mandatory deposits that banks keep with it by 150 basis points to infuse Rs.60, 000 crore into the financial system and also the Government cancelled sale of Rs.10, 000 crore bonds to ease liquidity pressure.

These decisions, which were announced on Friday morning, calmed down the stock market, which plunged by 1,000 points in the early trade at Bombay Stock Exchange.

The benchmark Sensex staged a moderate recovery but still closed lower by more than 800 points at 10,527, the lowest in more than two years, following sell-off spree which mirrored the panic among investors worldwide.

Similarly, the wide-based National Stock Exchange index Nifty in volatile movements, closed lower by 233 points at 3,279, after touching the day's low of 3,198 points. (ANI)