Finance Minister of India


Shri P. Chidambaram
Finance Minister of India

2008.10.15


Press Statement of Hon'ble Finance Minister

  





               After identifying liquidity as the main problem that has constrained the financial system, a number of measures were taken between October 6, 2008 and today. These measures have infused considerable additional liquidity into the market.

2.             After extensive consultations, it is proposed to take the following additional measures:

  1. Under the Agricultural Debt Waiver and Debt Relief Scheme, Government had agreed to provide to the commercial banks, RRBs and cooperative credit institutions, a sum of Rs.25,000 crore as the first instalment. It is felt that this money should be provided immediately. Hence, at the request of Government, RBI has agreed to provide a sum of Rs.25,000 crore to the lending institutions immediately. The money will be made available to the commercial banks (Rs.7,500 crore) and to NABARD (Rs.17,500 crore). There will be no requirement of providing collateral.
  2. The limit of FII investment in corporate bonds will be raised from US$ 3 billion to US$ 6 billion. [SEBI has informed me that it will address any requests for relaxation in the proportion of investment in equity and debt required to be maintained by an FII under current regulations.]
  3. Our banks are well capitalised. Their CRARs are well above the Basel norm of 8 per cent and the RBI stipulated norm of 9 per cent. No bank has a capital adequacy of less than 10 per cent. Nevertheless, Government has decided to provide the banks access to finance in order to raise the CRAR of banks that are now between 10 to 12 per cent to reach the level of 12 per cent by a suitable date in the future. The details of the capitalisation scheme are being worked out.
  4. RBI has already issued an advisory to the banks to enable smooth flow of credit to borrowers of term loans as well as working capital. Government is also issuing an advisory to public sector banks impressing upon the banks the need to:
    • ensure easy drawdown against sanctioned limits;
    • appraise, promptly, requests for enhancement of credit limits; and
    • continue to participate actively in the inter-bank call money market.

3.             I have been informed that RBI will release a statement shortly on certain measures that the RBI intends to take.