The RBI Governor, who is attending the Annual Meeting of the World Bank and the International Monetary Fund in Washington, has said that though the Indian banks have some exposure to the distressed financial instruments, but it is very small compared to the overall size of the business. The Indian banking system is sound, well-capitalised and well-regulated, said Subbarao, adding, Indias forex and money markets have been functioning in an orderly manner.
He further said that the RBI has taken action to inject liquidity into the system and is monitoring the situation on a continuous basis, and will take effective and swift action.
On Friday, Oct 10 when Sensex plunged by almost 1,000 points to 10,300, RBI swung into action and announced a one percentage point cut in the cash reserve ratio (CRR, proportion of total deposits that banks need to maintain with the central bank).
On Monday, Oct 6 RBI had already cut the CRR by 0.5 percentage point.