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RBI scotches ICICI Bank rumours, Govt says don’t panic, we are watching

Finance Minister P Chidambaram and regulators, SEBI and the RBI stepped in to soothe financial markets today...

Written by Enseconomicbureau | New Delhi |
October 1, 2008 1:15:54 am

Finance Minister P Chidambaram and regulators, SEBI and the RBI stepped in to soothe financial markets today after the benchmark Sensex plunged 442 points or 3.5 per cent to its lowest levels in two years and panic gripped ICICI Bank customers who queued up outside ATMs in certain cities to withdraw deposits. Their assurances helped and the market closed 2.1 per cent up at 12,860 points.

Barely minutes after the market opened sharply lower, SEBI chairman CB Bhave who was in Delhi allayed fears of the impact of the global credit crisis on the Indian markets. “There is no panic… we are monitoring the situation closely. We will take the severest action against any institution circumventing our short-selling rules,” he told reporters before his meeting with the Finance Minister and other officials in North Block.

After a meeting with Bhave and economic affairs secretary Ashok Chawla, Chidambaram said, “We are suffering the consequences of turbulence around the world. Basically, the Indian market is a sound, attractive and well-regulated market.” He also said the government and SEBI would tweak (tighten) the regulations if it was required for the smooth functioning of the markets.

While market sentiments were expected to be poor after the House of Representatives in the US yesterday rejected the $700-billion package to rescue the financial sector, rumours regarding the health of India’s second biggest lender ICICI Bank made matters worse back home.

To prevent a run on ICICI Bank and scotch rumours, the Reserve Bank of India, in a rare statement, said the country’s largest private bank was safe and had enough liquidity in its current account with the central bank to meet depositors’ requirements. “The RBI has arranged to provide adequate cash to ICICI Bank to meet the demands of its customers at its branches and ATMs,” the central bank said in a rare statement on safety of individual banks. ICICI Bank closed 8.4 per cent higher today, rebounding from a two-year low.

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