Bank deposits safe, inflation to fall further: Manmohan

“RBI and the government are carefully monitoring flow of credit and will ensure additional liquidity results in actual credit,” the PM said.

The Prime Minister assured that all the deposits in Indian banks are safe there should be no fear of failure of Indian banks like the American counterparts.

Singh said the recent steps taken by the government and central bank would help ease a liquidity shortage.

Inflation was also expected to moderate further in the next two months, he added.

INFLATION WOULD FALL FURTHER

With the price situation showing signs of improvement, Prime Minister Manmohan Singh on Monday said the inflation rate would fall further in the next two months.

“We expect a further reduction in Wholesale Price Index (WPI) in the next two months,” he said while making a statement in the Lok Sabha.

The inflation rate, measured by movement in the WPI, has for the third successive week remained below 12 per cent and came down to 11.44 per cent for the week ending October 4, from 11.80 per cent a week ago.

“WPI has declined in the last three weeks, and although the current rate is still high, the movement in the level of prices shows a clear deceleration in the current momentum of inflation,” he said.

Welcoming the steps taken by the RBI to infuse liquidity and reduce short-term lending (repo) rate, Singh said, “It is broadly consistent with our objective to control inflation which has already begun to moderate.”

RBI on Monday reduced the repo rate by 100 basis points allowing banks to borrow funds from the central bank against government securities at an interest rate of 8 per cent against 9 per cent earlier.

The central bank had earlier reduced mandatory deposit that banks maintain with the RBI by 250 basis points unlocking Rs 1,00,000 crore of the banking funds.