Chidambaram says Reserve Bank policy will help financial stability

New Delhi, Oct 24 : Finance Minister P. Chidambaram today said that the Reserve Bank of India (RBI)'s policy review was on expected lines to manage India's financial stability.

He described the RBI statement an important announcement that the central bank would employ both conventional and unconventional methods to ensure financial stability.

"I wish to draw attention to a couple of other aspects of RBI's statement. The first and the most important statement I think is to manage the trinity of financial stability, price stability and sustaining growth. RBI will continue to deploy both conventional and unconventional tools," said Chidambaram.

"The assessment of the central bank about the foundations of the Indian economy being strong endorses the finance ministry view," he added.

He also said that it was necessary to be calm and confident to tide over the global financial crisis.

In its half yearly review, the RBI kept its key-lending rate steady at 8.0 per cent. It left the cash reserve ratio, the amount of funds that banks have to keep on deposit with it, unchanged at 6.5 percent, but lowered its 2008/09 growth forecast to range between 7.5 to 8.0 percent from a previous forecast of around 8.0 percent.

Soon after RBI announced its credit policy, the Bombay Stock Exchange (BSE)'s sensitive index extended a loss of around ten per cent in trading.

The central bank had already cut the repo rate, at which it infuses cash into the banking system, for the first time in more than four years on Monday, as part of a slew of steps by the authorities to shore up confidence as global recession fears grip investors worldwide.

ANI