FM cites China, says RBI step not drastic

HYDERABAD: The whole intention is to suck out the liquidity from the system, finance minister P Chidambaram said here in a quick reaction to the 50 bps hike in cash reserve ratio by Y V Reddy.

“It is not something drastic,” he said in Hyderabad, adding that China, too, has done something similar.

“What the combined impact of the two steps will be has to be seen,” he said on the sidelines of a meeting on the National Food Security Mission and stock taking of various projects in Andhra Pradesh.

“That is something that I shall do after getting back to Delhi,” he added.

Meantime, Chidambaram is meeting chiefs of public sector banks on Wednesday for a review of the credit and interest rate situation.

His efforts would be to gear up banks to meet credit needs of the farm sector and small and medium enterprises. Meanwhile, a senior finance ministry official aid the RBI policy is “totally in line with the government’s thinking”. He said the policy would not hinder the growth impulses in the economy in any way.

“We don’t expect banks to increase lending rates. There is plenty of liquidity. If at all, there could be some rationalisation of banks’ deposit rates which had been raised in recent months,” he said. 

With Priya Ranjan Dash in New Delhi