RBI, Finmin review global turmoil impact on financial sector

Mumbai, Nov 9 (PTI) A high-level meeting of financial
market regulators headed by Reserve Bank of India (R.B.I.)
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 (H.L.C.C.F.M.) 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 I.R.D.A. 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 USD 57 billion
to USD 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 R.B.I. and the government have taken a
series of steps to increase money supply.

R.B.I. 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 (S.L.R.) by 100 basis
points.

S.L.R. is the percentage of deposits that banks have to
mandatorily invest in government securities.

Besides, R.B.I. also reduced the short-term lending
(repo) rate by 150 basis points to 7 percent.

Finance Minister P. Chidambaram had last week held a
meeting with P.S.U. 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.

Meanwhile, Prime Minister's Economic Advisory Council
Chairman Suresh Tendulkar said India's economic growth may
slip to about 7 percent in the current fiscal in wake of the
global financial meltdown.

"My gut feeling is that it (economic growth rate) may
come down to seven percent...we will take another look in
January taking into account the data coming in," said
Tendulkar.

In August, P.M.E.A.C. had forecast a Gross Domestic
Product growth forecast of 7.7 percent in August and it is
slated to revise its projection early next year.


At the same time, International Monetary Fund has also
lowered India's economic growth forecast marginally to 7.8
percent for 2008 and 6.3 for the next year. PTI DP
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