RBI Governor says Indian banks are sound, stable

NO FEARS: The RBI governor has reassured the Indian depositors about the stability of the Indian banks.

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Washington: A day after Union Finance Minister P Chidambaram sought to allay depositors concerns, the Reserve Bank of India (RBI) Governor Duvvuri Subbarao, too, assured that the Indian depositor’s money in the bank is safe.

CNN-IBN 's Indira Kanan spoke to Subbarao, who is in Washington for the World Bank and International Monetary Fund meetings, about the current financial crisis and its impact on India.

Indira Kanan: Could you give us a brief of your agenda here in Washington and the kind of meetings that you have held?

Duvvuri Subbarao: This is the annual fund bank meeting for which both the finance minister and central bank of India come every year and on the sidelines of the annual meeting, we meet with our counterparts from a number of countries to exchange notes. This year of course, the entire scenario was overshadowed by the unfolding global crisis and the impact on respective countries what each country is doing and how and what we should be doing collectively.

Indira Kanan: In what way do you think India can play a role in this collective action?

Duvvuri Subbarao: This is an era of financial globalisation, so every country is affected. As we have seen coordinated action across governments and across central banks is important to manage a crisis like this. So far the centre of the crisis as well as the management has been confined to the advanced countries just as it should be because that is where the crux of the problem is. But countries such as India, which is not directly impacted but having the knock on an indirect effect. Also having some problems. As we move forward. I think we should all be acting collectively.

Indira Kanan: Indian government has said that it will take more steps to increase liquidity in the system in the coming days. Could you give us an idea about what the RBI is considering?

Duvvuri Subbarao: RBI has taken action to manage liquidity and infuse liquidity as demanded by the situation. We reduced the SLR by one per cent in mid September. We reduced the CRR by 1.5 per cent effective October 11. The impact of this reduction of CRR to 1.5 percentage points should be seen in the next two weeks as the banks adjust to the lower CRR. The liquidity that we have injected as a result of the SLR and CRR reduction is of the odd of Rs 1,00,000 crore which is about $22 billion. We are watching the situation. If necessary, we will take further action. But for now we want to watch the impact of liquidity management already done before taking further measures.