The Hindu Business Line : RBI chief calls for ‘significant’ policy action to tackle crisis

Kolkata, Dec. 11 The government and the Reserve Bank of India need to take “significant” steps to counter the “significant crisis”, Dr D. Subbarao, Governor, Reserve Bank of India, said here on Thursday.

“The crisis has evolved and is evolving. Nobody around the world has the exact picture of how big the crisis is. It is a significant crisis and we need to take significant policy actions,” he told reporters after RBI’s Central Board Meeting here on Thursday.

Talking about the way forward, he said, “The situation is uncertain and it is not possible for us to calibrate a precise roadmap but we will continue to take appropriate measures at the appropriate time,” he added.

The Reserve Bank, Dr Subbarao said, would review the inflation forecast in the next monetary policy scheduled for January 27, 2009.

On rate cuts

On being asked about further rate cuts, the RBI Governor said, “We are constantly reviewing the situation, we have already adjusted our CRR and policy rates and we will take appropriate measures at the right time.”

According to him, the monetary policy measures taken by the central bank have so far yielded positive results.

Banks should take the cue from the rate cuts announced by the apex bank on Saturday and should revise their lending rates accordingly, he pointed out.

Dr Subbarao further said that RBI would closely monitor the developments in the global and domestic financial markets and would try to minimise the stress on various sectors of the economy on account of the international financial crisis and the global slowdown.

Credit, refinance

The apex bank on Thursday announced Lines of Credit worth Rs 9,000 crore to the National Housing Bank and Exim Bank.

The bank’s Central Board on Thursday approved refinance facility of Rs 4,000 crore to NHB and Rs 5,000 crore to the Exim Bank under the prevailing repo rate (6.5 per cent) under Liquidity Adjustment Facility for a period of 90 days.

“During the 90-day period, the amount can be flexibly drawn and repaid and at the end of the 90-day period, the drawal can also be rolled over.

“This refinance facility will be available up to March 31, 2010,” the RBI Governor said.

Support for housing

This would help provide liquidity support to the housing sector, particularly to the housing finance companies, which have been adversely affected by the recent financial market developments, he said.

The refinance facility to Exim Bank would help mitigate pressures on account of the recent developments on loan disbursements to Indian exporting companies, he said.

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