Date:19/09/2008 URL: http://www.thehindu.com/2008/09/19/stories/2008091961541200.htm

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Chidambaram sees no reason to halt financial sector reforms

Special Correspondent

There will be some impact due to global crisis, but economy will continue to grow

— PHOTO: V. SUDERSHAN

Optimistic: Finance Minister P. Chidambaram and Home Minister Shivraj Patil coming out of a Cabinet meeting on Thursday.

NEW DELHI: Commenting on the impact of the global financial crisis, Union Finance Minister P. Chidambaram on Thursday said that the Indian banks had strong balance sheets and were “very well regulated.”

Mr. Chidambaram pointed out that although the banking system was reasonably insulated from the global turmoil, the credit crunch could have some effect on the country as well. “If there is a credit crunch in the rest of the world, it will, to some extent, impact the credit availability in [the] Indian market. [The] RBI, day before yesterday [September 16], took steps to provide liquidity to the banks,” he said.

Unruffled by the ongoing financial crisis in the U.S., Mr. Chidambaram maintained that the Indian economy would grow at close to eight per cent.

The Minister also saw no reason for halting financial reforms. “Having regard to the context, having regard to the international situation and having regard to our ability to keep regulations one step ahead of innovation, as long as regulation remains a step ahead of innovation, there is no reason to fear that financial sector reforms will cause us difficulties or problems.” he said.

Assuaged by Mr. Chidambaram’s assurance, the Bombay Stock Exchange staged a smart recovery. After a slump of 705 points to a two-month low at 12,558.14 in early trading, the Sensex witnessed a rebound rally to close at 13,315.60, up by nearly 53 points. Likewise, the National Stock Exchange’s Nifty also closed 29.90 points higher at 4,038.15.