FM meets bankers, FIIs

Worried about fund inflows, seeks feedback on investor concerns

Finance Minister P Chidambaram on Saturday held a closed-door meeting with representatives of domestic banks and foreign institutional investors (FIIs) in the financial capital reassuring them that the government was on top of the ongoing economic situation in the country and promised action in the next 8-10 days.

Chidambaram held two seperate meetings with FIIs and bankers in Mumbai, accompanied by economic affairs secretary Arvind Mayaram and secretary, department of financial services, Rajeev Takru, seeking feedback from them about their concerns over problems in the country’s financial markets.
 
These meetings assumed importance as they come against the backdrop of continuing flight of capital, especially after RBI put restrictions of capital withdrawal by corporates and individuals last week, which triggered concern among overseas investors that the government was on the verge of a throwback to the early 1991 crisis, when stiff capital control was imposed due to the balance of payment crisis.

Especially, FIIs were eager to know what new steps and policy action the government is taking to ensure stability in the market, said sources close to four people who were part of the meeting. These investors also sought the Finance Ministry’s views on flagging growth, rupee fall, current account deficit (CAD), interest rate direction and issues impeding investments.

The FM assured FIIs that once the rupee slide is curbed and stability returns to the currency markets, interest rates would start falling, said a person who attended the meeting, adding, “The Finance Minister also assured us that CAD and fiscal deficit would come under control soon.”

Chidambaram is said to have told FIIs that the disinvestment of its holdings in Specified Undertaking of UTI (SUUTI) is in the offing. SUUTI is the restructured unit of the erstwhile UTI, holding shares of ITC, Axis Bank and Larsen & Toubro. Investors are understood to have told the Finance Ministry that the hardening of US bond yields is affecting overseas flows. They cautioned that if the yields hardened further more outflows could be expected. “One has to keep an eye on what the US Fed is doing. US Fed’s meeting on September 15 will be important,” said another person.

In a separate meeting with bankers, Chidambaram, Mayaram and Takru said that measures to attract more deposits and government clearances of large projects were underway. The bankers who met the FM included State Bank of India Chairman Pratip Chaudhuri, Bank of India CMD Vijayalakshmi Iyer, Canara Bank chief R K Dubey, ICICI Bank CEO Chanda Kochhar, HDFC Bank Managing Director Aditya Puri, StanChart India’s Anurag Adlakha and Pramit Jhaveri of Citigroup India.

“The discussion was about how we can improve the dollar flow in the country. It was just an exchange of ideas between the leading bankers who have more foreign offices and who have more NRE/FCNR deposits,” said Bank of India CMD Iyer, adding, “They have noted our views and they will look into the matter and get back.”

Iyer said bankers emphasised the need for a boost in exports in the wake of the fall in the rupee and the trade deficit. It should be deputed as a priority sector advance. There can be more focus and exporters can be given more sops for the direct and indirect taxes,” she said. According to her, some suggestions were increasing ceiling on export refinance and introducing short-term NRI deposits. After the meeting, Takru told reporters that many of the suggestions would be considered. “There were lot of discussions. Lot of good ideas came out and I think, you should see something coming up shortly, say in the next 8-10 days,” he said.