| Mumbai: Taking swift action to inject about Rs 60,000 crore into the cash-strapped system, the Reserve Bank today announced additional one per cent cut in mandatory requirements for banks to keep cash with the central bank over and above 0.50 per cent reduction announced earlier. With this, a total 1.50 per cent cut in Cash Reserve Ratio (CRR) to 7.50 per cent will come into effect from Saturday.
The measure taken by the apex bank matches the observation expressed by the Finance Minister P Chidambaram. Underlining the liquidity crunch present in the market P Chidambaram today promised to address the supply of money and other concerns of the economy. He also announced the decision to constitute a group consisting of top bankers headed by Finance Secretary Arun Ramnathan, who is also Secretary (Financial Services) to make a quick assessment of the requirements of the liquidity and advise the government accordingly.
"Credit is the lifeline of trade, commerce and business and, hence, it is important that credit continues to flow to all sectors of the economy. In consultation with RBI and other regulatory authorities, government will address the liquidity and other concerns about the economy," Chidambaram said in a statement.
He further added, "It is also important to maintain our confidence in the Indian economy. As the Cabinet noted on Wednesday, the fundamentals of our economy are strong and there are many indicators which affirm the sound fundamentals," he said in the statement, released by the Finance Secretary. Chidambaram, who is believed to have rescheduled his trip to Washington for attending the meetings of IMF-World Bank and G-20 leaders on the global crisis, stepped in after the BSE Sensex crashed by about 1100 points this morning.
Prompt action by RBI and Chidambarm's statement helped a substantial recovery but the selling pressured emerged to leave the market volatile. "I have requested the group to begin work immediately, also visit Mumbai and submit an interim report within a week," the Minister said. Reacting to the measures, bankers said that though liquidity would remain a problem, interest rate may come down. (PTI) | 
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