New Delhi, Nov 4 : Union Finance Minister P. Chidambaram met the head of the Public Sector Undertaking (PSU) banks in New Delhi on Tuesday to review the liquidity situation in the country.
The meeting came a day after Prime Minister Manmohan Singh's meeting with captains of Indian industry, who wanted the government to take steps to enhance liquidity.
Chidambaram said liquidity is a snapshot and liquidity is an everyday affair. India's central bank has been keeping a close watch on liquidity.
"We spent a considerable amount of time discussing the measures by the Reserve Bank of India (RBI) where the Cash Reserve Ratio (CRR) is reduced by 350 basis points, REPO by 150 basis points. Statutory Liquidity Ratio (SLR) permanent reduction by 100 basis points, a special window of 150 basis points for lending to Mutual Funds (MFs) and an additional Repo facility against no collateral. So, all this has considerably enhanced liquidity. But liquidity is a snapshot, you have to access liquidity everyday so it is continual exercise and RBI will keep a close watch on the liquidity," Chidambaram told reporters after a quarterly review meeting with chairmen of state-run banks.
The central bank has taken several steps to ease a cash squeeze and shore up growth in Asia's third-largest economy, including slashing banks' reserve requirements and cutting its short-term lending rate, as authorities battle to protect the economy from swirling global woes.
Chidambaram said banks have been provided a swap facility to access dollars.
"RBI has provided a swap facility from which banks can access dollars for their own requirements for their foreign branches and foreign RO's as well as for their important clients and RBI also out in place a rather complicated, not so complicated, rather complicated, by which rupee liquidity will be provided followed by dollar liquidity. Banks are very happy. Its after discussions with the Indian Banks Association (IBA) that system has been put in," he added.
The Prime Minister on Monday said all fiscal and monetary steps would be taken to protect economic growth, which has clocked nine per cent and above for the past three fiscal years.
The central bank expects 7.5 to 8.0 per cent growth this fiscal year but many analysts say it will be closer to seven per cent.
Analysts said the RBI's sudden decision to lower its lending rate by 50 basis points to 7.5 per cent on Saturday and slash banks' reserve requirements to release funds showed its concern that economic strains were quickly worsening.
India has followed central banks around the world in cutting rates, and on Monday Dr. Singh said New Delhi was working closely with other countries to ensure coordinated policy action to contain the crisis.