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RBI will take radical steps: FM

October 24, 2008 15:08 IST

Finance Minister P Chidambaram on Friday said the mid-term review of Reserve Bank's credit policy was on expected lines and the central bank would take radical steps to deal with the emerging situation.

"RBI will continue to deploy both conventional and unconventional tools. We cannot rely only on conventional measures but we will have to adopt unconventional or unorthodox measures," he said while welcoming the steps taken by the RBI.

He further said that the RBI has not touched the repo rate, reverse repo rate or the bank rate or the cash reserve ratio and "this is along the expected lines."

The central bank will infuse more liquidity if necessary, he said, adding that RBI will continue to use the Liquidity Adjustment Facility window with flexibility.

RBI, he said, had taken a number of steps between October 6 and October 20 to inject liquidity into the system to deal with the credit crunch.

The central bank had reduced the mandatory deposits that banks keep with RBI by 250 basis points unlocking a whopping Rs 1,00,000 crore (Rs 1000 billion) into the cash-starved banking system.

Besides, it has also slashed the short term lending (repo) rate by one per cent signaling softening of interest rates.

Credit policy: Complete coverage

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