Finance Minister P Chidambaram on Saturday held a closed-door meeting ln Mumbai with top bankers to take stock of the situation in the wake of rupee volatility and ways to shore up foreign capital to bridge the widening current account gap.
The minister, who will also be meeting foreign institutional investors whose money is key to funding CAD in the afternoon, did not speak to reporters waiting outside.
Chidambaram was accompanied by his top officials, including economic affairs secretary Arvind Mayaram and financial services secretary Rajiv Takru, while the bankers who met the minister included State Bank of India's Pratip Chaudhuri, ICICI Bank's Chanda Kochhar, HDFC Bank's Aditya Puri, Pramit Jhaveri of Citigroup India, Vijayalakshmi Iyer of Bank of India, Canara Bank chief RK Dubey and StanChart India's Anurag Adlakha among others.
The meeting assumes importance as it comes against the backdrop of continuing flight of capital, especially after Reserve Bank of India put restrictions of capital withdrawal by corporates and individuals last week, which triggered concern among overseas investors that the government was on the verge of a throwback to the early 199 crisis, when stiff capital control was imposed due to the balance of payment crisis.
The foreign institutional investors, who pulled out over $12 billion since May 22 after the US Fed hinted at scaling down bond buyback sooner than expected, has had a debilitating impact on the rupee, which had plumbed to a low of 65.56 to the dollar on Thursday.
The current plight of the rupee, which is the most bruised currency in entire Asia losing nearly 20 per cent since beginning of the fiscal, has mostly attributed to the high current account deficit, which stood at 4.8 per cent last fiscal and is likely to be higher in Q1 as well.
"The meeting was mainly to seek ideas and suggestions on what can be done about capital inflows.
“It was a very good and positive meeting," Kochhar told reporters after the meeting.
Asked whether there was any directive from the minister to the bank about NRI bonds, the SBI chairman joined in, saying "there was no directive, as it was only a consultation."
The meeting also assume significance in the backdrop of the volatility in the stock which have lost close to 10 per cent this year.
Chidambaram on Friday underlined the need for communicating the decisions of the government in an effective manner to the markets and all other stakeholders.
The minister had said yesterday that, "there is no cause for panic which seems to have gripped the currency markets that is feeding into other markets.
“We are confident that stability will return to these markets and we can get on with the task of promoting investment and growth."
He had also laid emphasis that there was no reason for "excessive or unwarranted pessimism" and said the recent liquidity control measures taken by the Reserve Bank to reduce volatility in forex market and quell speculation would be revisited with return of stability.