ICICI gets a confidence boost from RBI

I had pointed to increasing concerns from the financial channel of the coupling theory. This is just becoming a nightmare for all the authorities. There was a biog concern on ICICI Bank today and the share price was sliding.

RBI had to issue a statement to calm market fears about the company:

There are reports in some sections of the media that based on rumours regarding the financial strength of ICICI Bank, depositors are withdrawing cash at its ATMs and branches in some locations.

It is clarified that the ICICI Bank has sufficient liquidity, including in its current account with the Reserve Bank of India, to meet the requirements of its depositors. The Reserve Bank of India is monitoring the developments and has arranged to provide adequate cash to ICICI Bank to meet the demands of its customers at its branches/ ATMs.

The ICICI Bank and its subsidiary banks abroad are well capitalised 

This is actually becoming a nightmare. Irrational exuberance first drives the prices to stratospheric levels across economies and then same irratinal pessimism lead to dramatic correction across economies. What do you do as a policymaker? If you want to intervene during “the rising”, the participants say such intervention is not needed, it is against free markets, markets find their own levels etc. However, in times of “the fall”, the same logic is defied and interventions are demanded.

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3 Responses to “ICICI gets a confidence boost from RBI”

  1. Avid reader Says:

    Hi Amol, What kind of depository insurance does bank accounts in India have? I think there is a general conception that public sector banks are fully guaranteed by the government. This might be misconception. Do you know anything about this?

    I do know that in the early years after independence, some Indian banks went bankrupt and people got only a few paise for a rupee.

    Thanks in advance

  2. Amol Agrawal Says:

    Hi Avid Reader,

    You will get all the details here http://dicgc.org.in/beta02/index.asp

    Amol

  3. Avid reader Says:

    Thanks Amol!

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