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Govt orders regulator war-room meetings with RBI, Sebi chiefs

Stepping up crisis-management measures to cushion the anticipated economic downturn precipitated by the global financial turmoil...

Written by Pranab Dhal Samanta | New Delhi |
October 22, 2008 1:32:45 am

Stepping up crisis-management measures to cushion the anticipated economic downturn precipitated by the global financial turmoil, the government has ordered the High-Level Coordination Committee on Financial Markets to meet at least once a month as an emergency measure to take stock of the situation and identify timely responses.

The committee, headed by RBI governor Duvvuri Subbarao, is essentially a panel of regulators comprising heads of IRDA, PFRDA and SEBI besides top Finance Ministry officials.

The committee convened an emergency meeting in the first week of October to assess preparedness of regulators to tackle the impact of the financial crisis.

The decision comes after repeated suggestions to evolve a mechanism that can provide timely and coordinated response to a situation that is unpredictable, requiring effective regulation.

As of now, sources said, efforts are on to ensure that steps taken by the government to improve the liquidity situation are taken further by banks which are now extremely cautious about their lending profile.

Despite the fact that over $10 billion have been withdrawn from Indian markets in the form of FII withdrawals, sources said, the RBI is not setting any exchange rate targets. However, it continues to keep a close tab in case there is unexpected movement on the currency front. Further, indications are that more rate cuts are in the offing as the RBI works on the credit policy to be announced on Friday.

On the global front, India is willing to play a constructive role in trying to put in place more effective regulation. However, sources said, New Delhi wants to first ensure that it is made a purposeful participant and not pushed to stamp a blueprint devised by developed countries. To this end, the BRIC (Brazil, Russia, India and China) countries along with other major developing economies like Mexico and South Africa are in close touch to present a coordinated response on the global stage.

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