The Hindu : Business : Desist from panic sales of shares: FM

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Friday, Oct 24, 2008
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Desist from panic sales of shares: FM

Special Correspondent

Banks will resume brisk lending soon

Rupee slump due to redemption pressures
Wild swings in BSE benchmark index

NEW DELHI: Finance Minister P. Chidambaram on Thursday advised stock market investors to take ‘informed’ decisions and desist from panic sales while hoping that banks would resume brisk lending now as there was adequate liquidity in the monetary system. Interacting with the media here on the various steps taken so far to address the credit crunch, Mr. Chidambaram said: “If you go by the reverse repo, I think there is adequate liquidity. The point now is banks should not park excess funds with [the] Reserve Bank. They have been advised to lend.”

Mr. Chidambaram felt that while a slight freeze on credit was visible during the first half of October, brisk lending would now resume on infusion of adequate liquidity. Alongside, with the easing of norms for external commercial borrowings (ECBs), he was optimistic that corporates would bring funds into the country as soon as possible.

The other silver lining was the further slide in the rate of inflation to 11.07 per cent, marking a drop for the fourth week in a row. Following the Finance Minister’s observations, the bourses appeared to have factored in the positive cues.

On the depreciation of the rupee against the dollar, Mr. Chidambaram attributed the slump to the redemption pressures being faced by some of the foreign institutional investors.

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