Finance minister Yashwant Sinha assured Parliament today that the government would take a series of measures in the next couple of weeks to "blunt" economic slowdown, even as he insisted that financial institutions, including IDBI, are not in a mess.
Sinha told the Rajya Sabha that there was no need for any central support for the recapitalisation of three weak banks _ Indian Bank, Uco Bank and United Bank of India _ which have shown good progress.
"But if any necessity arose for budgetary support, the government will not have any hesitation to give for these banks," he said.
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Speaking during the passage of the supplementary budget and demand for grants, Sinha said the current problems in the financial institutions was a reflection of the situation in the real economy which was facing slowdown and had not developed due to any weakness in the institutions.
The finance minister ruled out any need to import foodgrains because of the 13 million tonne drop in production this year due to drought in parts of the country. The need does not arise as the godowns are overflowing due to good crop in the last eight years, he remarked. Remarking that the economic slowdown is not peculiar to India, he said the global scenario was "quite depressing" and a revival is expected from the first or second quarter of next year.
On financial institutions, Sinha said: "There is no impending crisis in IDBI as feared in certain quarters". IDBI does not face any liquidity or repayment problem and "has not approached the government for any help," the finance minister said.
Terming the IFCI crisis as "temporary", he said the Rs 1,000 crore bail-out package would enable the institution to overcome the problem. This includes Rs 400 crore for the company in the supplementary budget. The remaining Rs 600 crore is to be provided by the institution's shareholders including IDBI, Life Insurance Corporation and State Bank of India. Sinha said the problem was due to a "mismatch" in resources of the financial institution as it resorted to short-term loans to fulfill its long-term lending. This was being corrected now. On the Madhavpura Mercantile Cooperative Bank, Sinha said the Centre has not provided any money for the Rs 800 crore bail-out package. The crisis, he said was not due to inefficiency or malfunctioning of the cooperative bank but a