RBI, Finmin review global turmoil impact on finance

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Mumbai, Nov 9: A high-level meeting of financial market regulators headed by RBI governor D Subbarao reviewed the impact of global crisis on India and also the steps taken to neutralise its impact on the country.

“The High-Level Coordination Committee on Financial Markets (HLCCFM) reviewed the impact of the global financial turmoil on the Indian financial sector and the action taken to address the emerging issues,” the central bank said in a release.

The committee, which comprises finance secretary Arun Ramanathan, Economic Affairs Secretary Ashok Chawla, Sebi chairman C B Bhave and IRDA Chairman J Harinarayan, also took stock of the “policy agenda on the way forward”.

The meeting assumes significance in the wake of admission by Prime Minister Manmohan Singh that “a crisis of this magnitude was bound to affect our economy and it has.”

Following the global meltdown the foreign exchange reserves of the country has depleted by around $57 billion to $ 253 billion for the week ended October 31.

Among other things, the high-level committee also discussed the recent developments in the domestic financial markets as also those taking place in the global financial markets.

Meanwhile, the Bombay Stock Exchange benchmark index, which touched a high of about 21,200 in January, slipped to less than 10,000 last week. The trading on bourses was also marked by excessive volatility.

In order to ease liquidity crunch being faced by the Indian corporates, both RBI and the government have taken a series of steps to increase money supply.

RBI in the last one month has injected liquidity to the tune of Rs 2,70,000 crore in the cash-starved banking system by cutting the percentage of deposits banks have to keep with the central bank Cash Reserve Ratio - by 350 basis points, and Statutory Liquidity Ratio (SLR) by 100 basis points.

SLR is the percentage of deposits that banks have to mandatorily invest in government securities. Besides, RBI also reduced the short-term lending (repo) rate by 150 basis points to 7%.

Finance minister P Chidambaram had last week held a meeting with PSU banks and obtained assurance from the Indian Banks Association that they would reduce interest rates.

Following the meeting, more than a dozen public sector banks have reduced benchmark lending rate by up to 75 basis points leading to cheaper home, corporate, auto and personal loans to promote growth.