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After a long wait Reserve Bank of India ( RBI ) finally slashed the CRR. On Monday , after market hours RBI breifed a meeting and announces 50bps down in Cash Reserve Ratio (CRR) to 8.50% from currently 9%. The change will come into effect from the fortnight beginning Oct. 11, 2008. As a result of this reduction in the CRR, an amount of about Rs 200 billion or 20000crores would be released into the system.
This measure is ad hoc, temporary in nature and will be reviewed on a continuous basis in the light of the evolving liquidity conditions, a government notification said. It may be recalled that on Sep. 16, 2008, the RBI announced several measures to ease the pressures on domestic financial markets brought on by external developments in response to the bankruptcy/sell-out/restructuring of some of the world`s largest financial institutions. Since then, there has been a sharp deterioration in the global financial environment with the number of troubled financial institutions rising, stock markets weakening and money markets strained. Central banks across the world have stepped up their liquidity operations, including coordinated actions, and some have banned/limited short selling of financial stocks.
These new developments have impacted domestic money and forex markets with a marked increase in volatility and a sharp squeeze on market liquidity as reflected in the movements in overnight interest rates and the high recourse to the liquidity adjustment facility (LAF). Active liquidity management is a key element of the current monetary policy stance.
The Reserve Bank will continue with its policy of active demand management of liquidity through appropriate use of the CRR stipulations and open market operations (OMO) including the MSS and the LAF, using all the policy instruments at its disposal flexibly, as and when the situation warrants, it added.
SEBI removes ban on issuance of P-Notes
Market regulator, Securities & Exchange of India (SEBI) has decided to lift curbs on the issuance of the Participatory Notes (P-Notes) by the Foreign Institutional Investors (FIIs) in a bid to revive the stock markets troubled by the global financial meltdown. SEBI Chairman C. B. Bhave after the Board meeting in Mumbai said that the regulator will remove the 40% restriction for issuance of Particpatory Notes for both cash and derivative segments.
SEBI has also decided to undertake a comprehensive review of FII framework in the backdrop of global developments triggered by ongoing global turmoil. The regulator had imposed the restrictions on the P-Notes in October last year amid excessive speculation.
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1 comments for this post
:) Good Attempt by RBI and SEBI
Please provide ur Comments here