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The RBI Governor, Dr D. Subbarao

Our Bureau

New Delhi, Oct. 14 The Reserve Bank of India Governor, Dr Duvvuri Subbarao, on Tuesday said that the liquidity situation was comfortable and that financial markets were under control following measures in the past few days to infuse liquidity into the banking system.

“We believe everything is under control. We have done what we had to. Today, the market situation is under control. Call money rate is down to 9 per cent,” Dr Subbarao told reporters soon after meeting the Finance Minister, Mr P. Chidambaram, at his North Block office on Tuesday evening. He later met the Prime Minister, Dr Manmohan Singh.

Dr Subbarao said that he had reviewed the liquidity situation with the Finance Minister. The Prime Minister later reviewed the impact of global financial crisis on India and the steps taken by the Finance Ministry and RBI. The RBI Governor, however, declined to comment on what more measures were on the anvil to boost liquidity.

Earlier in the day, the central bank had come to the aid of the mutual funds industry by holding an additional money auction that saw Rs 3,500 crore of 14-day money move into certain banks at 9 per cent interest a year. Meanwhile, Mr Chidambaram, on Tuesday welcomed the RBI announcement on the additional 14-day money auction. His reactions to the announcement came soon after the Indian equity markets opened on a bright note, going up by about 500 points in early trade.

He said that the mutual funds had sought a facility for accessing funds after some of them faced liquidity stress in meeting redemption requirements in debt and money market instruments.

Mr Chidambaram said that the Government has been informed by the mutual funds industry that against their borrowing from the banks they will give as security, mainly, certificate of deposits of the banks themselves.

“IBA Chairman 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,” he said.

More Stories on : Financial Markets | RBI & Other Central Banks | Mutual Funds

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