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Tuesday, Oct 14, 2008
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Front Page

Steps to infuse more liquidity

Special Correspondent

Chidambaram assures investors

NEW DELHI: In a move aimed at ushering in the “confidence factor” in a free-falling stock market and pre-empting its further tanking, Finance Minister P. Chidambaram on Monday promised a slew of concerted measures to infuse more liquidity and advised investors to take “informed” decisions, without haste or panic.

Reading out a statement at a press conference here about 15 minutes before trading on the bourses began, Mr. Chidambaram said: “We [RBI, SEBI and the government] are working on more measures that will infuse liquidity, make credit intermediation smoother, and increase the confidence of depositors and investors. We hope to be able to announce them shortly.”

Our banks are ready and willing to provide credit. Suitable advisories are being issued to the banks …We are watching the situation carefully and we will respond swiftly according to the needs of the situation,” he said in his statement.

Mr. Chidambaram pointed out that with authorities in the U.S., the U.K., Europe and Australia announcing a number of financial stabilisation measures over the weekend, the capital markets in Australia and three of the East Asian countries had “opened on a bright note this morning.” Goading investors to stem the mayhem on the domestic bourses, he said: “I expect that our capital market will also take its cue from these positive developments.”

The Finance Minister’s appeal aired live by TV channels succeeded in talking up the market. For, not only did the Bombay Stock Exchange (BSE) 30-share Sensex open 495 points higher, as compared to Friday’s closing, it ended the day’s trading with a gain of about 781 points, at over 11,309.

In fact, apart from the positive global sentiment, aiding the robust relief rally after a five-day slump in a row last week was Mr. Chidambaram’s reassuring statement for both bank depositors and stock market investors alike. “We must remain confident and respond to the situation in a cool and mature manner. We must banish fear.”

Later in the day, the official panel headed by Finance Secretary Arun Ramanathan, which was set up to look into the liquidity requirements, had its first meeting and considered various options for increased flow of credit in the monetary system. Among the measures under study are further cuts in the Reserve Bank’s mandatory norms under which banks are required to park cash deposits with the apex bank.

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