Amid global liquidity crunch, the Finance Minister Palaniappan Chidambaram on Tuesday expressed hope that Indian markets will recover soon following positive signals from US and the European capital markets which closed on a strong note last night.
Following is the text of the finance minister Chidambaram’s statement:
“The US and the European capital markets closed on a strong note last night. The East Asian markets have opened on a bright note this morning. It appears that the measures announced by various Governments and Central Banks have not only infused greater liquidity into the markets but also helped restore confidence to a significant degree.
I hope that the same sense of optimism and confidence will be visible in the Indian markets too.
Last night, it was brought to the notice of Government that some mutual funds faced some stress in liquidity in meeting redemption requirements in respect of debt instruments and money market instruments. They sought a facility for accessing funds. Consequently, Government requested SEBI and RBI to meet today and address the issue.
This morning, Chairman, SEBI met the Deputy Governors of RBI. Later, RBI heard key players in the mutual fund industry. Following these meetings, RBI has announced a special 14 day repo (to commercial banks) at 9 per cent for a sum of Rs.20,000 crore with a view to enabling the banks to meet the liquidity requirements of mutual funds.
Government welcomes this announcement. The government has been informed by the mutual fund industry that against their borrowing from the banks they will give as security, mainly, Certificate of Deposits (CDs) of the banks themselves.
Chairman, IBA is in touch with the banks as well as the mutual fund industry to decide on an appropriate rate at which the banks will on-lend to the mutual funds.
Governor, RBI has returned to Mumbai. He has been requested to go over to Delhi this evening. The Governor is scheduled to meet the Prime Minister later this evening.”
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