Fire fighting rupee: Chidambaram, officials meet bankers, FIIs

Finance Minister P Chidambaram and other top government officials today held closed-door meetings with top bankers and foreign institutional investors to address their concerns about the country’s economy and explore ways to shore up foreign capital to bridge the widening current account gap.

According to a PTI report the minister did not speak to reporters waiting outside after his meeting with the bankers.

Chidambaram was accompanied by top government officials, including economic affairs secretary Arvind Mayaram and financial services secretary Rajiv Takru.

Among the bankers who met the minister were SBI’s Pratip Chaudhuri, ICICI Bank’s Chanda Kochhar, HDFC Bank’s Aditya Puri, Citigroup India’s Pramit Jhaveri, Bank of India’s Vijayalakshmi Iyer, Canara Bank’s RK Dubey and StanChart India’s Anurag Adlakha, the PTI report said.

“The meeting was mainly to seek ideas and suggestions on what can be done about capital inflows. It was a very good and positive meeting,” Kochhar told reporters after the meeting.

When asked whether there was any directive from the minister to the bank about NRI bonds, the SBI chairman said, “There was no directive, as it was only a consultation.”

The minister had earlier said that the government weighing various options, including NRI bonds, to bring in dollars into the country.

According to a CNBC-TV18 report, Mayaram told reporters the meeting with the FIIs was aimed at that understanding their concerns and that they were addressed.

The minister’s meeting with FIIs assumes significance in the back drop to the rupee’s decline against the dollar due to the capital outflows.

FIIs have withdrawn $12 billion from the country after the US Fed indicated on 22 May that it may end its lose money policy sooner than expected.The outflow weakened rupee and the RBI’s measures to defend only aggravated the currency’s fall against the dollar.

Last week, the RBI had also restricted overseas direct investments by Indian individuals andcorporates. The move had triggered concern that the government may even impose such controls onoverseas investors, as it did during the balance of payment crisis in the early 1990s. The foreign investors resorted to panic selling due to such fears and the rupee hit aa life low of 65.56 against the dollar on Thursday.

After the meeting with FIIs, Mayaram, however, exuded confidence that strong inflows will compensate the outflows, but also said will have wait and see how stability can return to the currency.

The country’s current account deficit, which stood at 4.8 percent of GDP last financial year, is likely to be wider in the first quarter of the current year as the rupee’s 20 percent fall has increased the country’s import bill.

FII money is key to funding the CAD.

Chidambaram had yesterday underlined the need for communicating the decisions of the government in an effective manner to the markets and all other stakeholders.

The minister had said yesterday that, “There is no cause for panic which seems to have gripped the currency markets that is feeding into other markets. We are confident that stability will return to these markets and we can get on with the task of promoting investment and growth.”

He had also laid emphasis that there was no reason for “excessive or unwarranted pessimism” and said the recent liquidity control measures taken by the Reserve Bank to reduce volatility in forex market and quell speculation would be revisited with return of stability.

With inputs PTI