Bank deposits safe: Manmohan Singh

By Xinhua,

Mumbai : With the country facing ripple effects of the global meltdown, Indian Prime Minister Manmohan Singh on Monday assured the Lok Sabha that deposits in banks are “entirely safe” but said the nation must be prepared for a “temporary slowdown” in the economy, according to NDTV.

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“Our banks, both in the public sector and in the private sector, are financially sound, well capitalised and well regulated. There should be no fear of a failure of any bank,” Singh said in a suo moto statement.

“I wish to assure depositors in our banks that their deposits are entirely safe,” he said.

The Prime Minister struck a note of caution against the backdrop of a stock market crash and fears of global crisis hitting the Indian banks.

“The financial storm has shaken confidence in the system and precipitated a steep decline in stock markets. It has produced a sharp slowdown in economic activity, with the prospect of a prolonged recession in industrialised countries,” he said.

Exuding confidence over huge capital investment in the pipeline ,he said, “nevertheless, we must be prepared for a temporary slowdown in the Indian economy”.

He said the precise impact was difficult to estimate at this stage since the depth and duration of the global slowdown remained uncertain.

Singh said the financial crisis and the economic slowdown in the developed countries is likely to have an “indirect impact” on the Indian economy.

The Prime Minister said both the RBI and the government were carefully monitoring the flow of credit and would ensure that the additional liquidity infused into the system translated into actual credit.

“We will not hesitate to do more, if needed. While the capital adequacy ratios of all our banks are well above the Basel norm and above the RBI stipulated norm, government has promised that it will help banks, which have lower ratios, to access funds to increase the capital risk-weighted asset ratio to 12 percent,” he said.

Indian government, he contended, was conscious that it was not enough to infuse liquidity which must translate into expanded flow of credit to industry, trade and business.

While inflation has shown a clear deceleration, the Prime Minister said he expects a “further reduction” in the wholesale price index in the next two months.

He said some estimates projected GDP growth to go down to 7.5 percent in the current year. “Our effort will be to minimise the negative effect of the financial crisis… to return to the growth trajectory of 9 percent,” he said.