The Hindu Business Line : Govt plans to inject liquidity into banking system

New Delhi, Feb 29 The Union Finance Minister, Mr P. Chidambaram, said on Friday that the Government would look to inject liquidity in the banking system over the next three years to make good the efforts of the scheduled commercial banks that would provide the estimated Rs 60,000 crore debt waiver to the farm community.

He also said that move to waive Rs 60,000 crore worth farm loans would strengthen the economy, if the Government is able to find a way to provide the money back to the banks.

“Instead of allowing them to be in the books as NPAs, if we can find a way to write off these loans and provide this money back to the banks, then they will have another Rs 60,000 crore to lend and that would have a multiplier effect,” Mr Chidambaram told reporters at a post-budget press conference here today.

In Budget 2008-09, no amount has, however, been provided towards the banks to support their debt waiver and debt relief scheme, which will have to be completed by June 30 this year.

“We will provide liquidity over a period of three years to the banking system. You must allow me... I have some intelligence. We would have worked out how we would provide liquidity over the three years. When we announce the plan, you will find how it will be done,” Mr Chidambaram said, when asked how the Centre would compensate the banks for the debt waiver.

Growth stimulant

SpaThe Finance Minister also said that the Budget has spared the corporate sector from any burden. “Budget would stimulate growth in the economy and the next year would be another good year,” he said.

On when he expects the exchange traded currency futures and interest rate futures to be introduced, Mr Chidambaram said that no specific timeline can be provided in a Budget speech, but expressed confidence that it would be done within a year.

“We already have the RBI and SEBI nod. It will be implemented within a year, as every Budget announcement is,” he said.

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