According to RBI figures, as on 26th September, 2008, non-food credit increased, year-on-year, by 24.8 per cent. Between April and 26th September, non-food credit grew by 7.8 per cent.

Time and demand deposits with banks grew, year-on-year, by 18.8 per cent and, between April and 26th September by 7.2 per cent. I am happy that depositors continue to repose their confidence in the health of our banking system.

Nevertheless, liquidity was found to be inadequate and, consequently, lenders were unwilling to take risks. Some lenders and investors faced redemption pressures leading to a sale of assets, especially stocks.

The markets that are bearing the brunt of the problem are the capital market and the money market and, to an extent, the foreign exchange market. These problems can be overcome if adequate liquidity is infused into the system.

Accordingly, RBI has taken measures that have infused an additional Rs.60,000 crore into the financial system. The LAF also provides liquidity and, as on 10th October, 2008, Rs 91,500 crore had been accessed by banks through the LAF window. We believe that these steps should ease the liquidity situation and the flow of credit should become smoother, relieving the pressures that had built up in the last two weeks.

Government, RBI and SEBI have been in close consultation with each other during the weekend. I have spoken to the Governor, RBI and Chairman, SEBI several times in the last two days. We are coordinating our actions. We are watching the situation carefully and we will respond swiftly according to the needs of the situation. We are working on more measures that will infuse liquidity, make credit intermediation smoother, and increase the confidence of depositors and investors. We hope to be able to announce them shortly.

... contd.