The Finance Minister P Chidambaram has constituted a panel to make a quick assessment of the liquidity requirement in the Indian market and advised the government to increase credit flow to trade, commerce and business.
The panel, which will submit its report within a week, will be headed by the Finance Secretary Arun Ramanathan and will have representatives from the Reserve Bank of India (RBI) among others.
Chidambaram has also welcomed the RBI's decision to cut cash reserve ratio (CRR) by 100 basis points. Last week, the RBI had announced a cut of 50 basis points. The total cut will come into effect from tomorrow, as a result of which a total amount of Rs 60,000 crore will be infused into the system.
"We have identified liquidity as the main problem. We will respond swiftly to take steps to infuse more liquidity according to the needs of the situation," said Chidambaram in a statement that was read out by Ramanathan.
The move to appoint a panel came after Chidambaram received a number of representations from banks, financial intermediaries, corporates and small businesses that the issue of liquidity needs to be addressed comprehensively.
"Credit is the lifeline of trade commerce and business, hence it is important that it continues to flow to all sections of the economy. In consulatation with RBI and other regulatory authorities, government will address the liquidity and other concerns of the economy," said Ramanathan, reading the finance minister's statment.