Economic Affairs Secretary Ashok Chawla On Tuesday said there was no need to hike the statutory liquidity ratio (SLR) for banks to manage the government’s huge market borrowing programme in the next financial year starting April.
“What is the need to hike SLR?” Chawla said when asked whether the Reserve Bank of India will consider raising it to manage government’s borrowing. SLR requirement of banks is currently at 24 per cent of the net demand and time liabilities of banks.
Many analysts have suggested hiking SLR to manage the government’s borrowing programme, which is projected to rise to Rs 3.62 lakh crore in 2009-10 (April-March) from Rs 3.06 lakh crore this fiscal.
The government and the RBI will continue to take more fiscal and monetary measures if needed, Chawla said.
“Fiscal and monetary steps have been taken in the past. It is a continuous process. More steps will be taken, depending on how the situation unfolds. It will still take some time,” he said.
The government has already taken a slew of measures, including duty cuts, while the central bank has effected a series of interest rate cuts to help release more money into the economy over the last three-and-a-half months. Since October, the RBI has cut Repo Rate by 400 basis points, Reverse Repo Rate by 250 bps and Cash Reserve Ratio by 400 bps to increase liquidity and fuel demand.
Commenting on the recently concluded G-20 meet of finance ministers and central bankers in London, Chawla said there was a lot of anxiety over developments in the global economy. At the same time, the meet proved to be “useful and productive” as several decisions were taken to tackle the prevailing instability in the global financial markets, he said. “It was a useful and productive meeting. There were decisions taken, like India and the BRIC nations have been invited to join the financial stability forum along with the G-7. It is a forward movement,” Chawla said.
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He also said that a revival in the Indian economy would be faster than in other global economies.
“India’s return to growth will be sooner and faster. The silver lining is that we will come out confident and stronger.”
India’s economy has taken a beating in the wake of a recession in many developed economies following the financial crisis that started in the US.
India’s gross domestic product growth during October-December decelerated to 5.3 per cent as against 8.9 per cent a year ago. The economy grew 6.9 per cent during April-December.
Asked whether India’s weakening ratings outlook was a spot of bother for the government, Chawla only said: “We’ll take care of that.”
Last month, Standard & Poor’s cut India’s long-term sovereign credit rating to “negative” from “stable”, citing the country’s deteriorating fiscal position.