M A I N   N E W S

Reserve Bank cuts CRR again
Tribune News Service

Mumbai, October 10
The Reserve Bank of India today increased the quantum of reduction in the Cash Reserve Ratio (CRR) for scheduled banks in order to release more than Rs 60,000 crore into the system.

In a statement issued here, the RBI said CRR of 8.5 per cent that was to come into effect from Saturday would be further reduced to 7.5 per cent. “This measure was undertaken with a view to injecting liquidity into domestic financial markets so as to alleviate the pressures brought on by the deterioration in the global financial environment. In the ensuing days, the global situation has worsened further,” RBI said.

“In the context of abrupt changes in the international financial environment, it is important to note that the macroeconomic fundamentals of the Indian economy are strong and resilient and that India's financial system is sound, well-capitalised and well-regulated. Money and forex markets in India have been operating in a relatively orderly manner. The current domestic market conditions are essentially a reflection of the adverse developments and extreme uncertainty in international financial markets,” RBI said in its statement.

The RBI said it was monitoring developments closely and continuously and would respond swiftly to any adverse external developments.

All’s well with ICICI: Govt
Bhagyashree Pande
Tribune News Service

New Delhi, October 10
The Reserve Bank of India has said the ICICI Bank will get Rs 4,000 crore from the cutting down of the CRR.

The government defended the ICICI Bank today, saying that all was fine with the bank and that all Indian banks were well-regulated and liquid. The share price of the bank tumbled by nearly 72 per cent in the past one month from Rs 1300 to Rs 360 today.

The RBI's decision to cut CRR is basically to tackle the liquidity position in the system and it would have an immediate impact on lending rates, ICICI Bank's joint managing director and CFO Chanda Kochhar said.

The bank that had exposures in the derivatives and stock market in the US and Europe has lost heavily. Sources in the banking circles say the bank is in need of funds as the situation back home is getting difficult with depositors withdrawing money and borrowers (mainly businessmen and real estate buyers) unable to pay back the borrowed money on time.

The bank is said to be rescheduling the terms of lending in favour of the borrower. At a time when the borrowing rate is anywhere between 12-17 per cent, the ICICI Bank has borrowed at 20 per cent.