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He admitted there is a liquidity crunch in the market and that the economy was facing 'spill over and ripple' effects of the global storm but assured the country that the "RBI is ready to take further steps and infuse more liquidity if necessary."
Chidambaram was confident that the country can weather the storm and appealed to "all the players in the economy" to cooperate with the government in the task.
In an interview, the Minister said "the weekend is a good time for people to reflect. Firstly, those who have money... there have been wage increases for the government servants, and many have received Diwali bonuses.
"Those who have money should spend some money and should save some money. Savings in banks are completely safe.
Our banks are well regulated and well capitalised. Depending on your risk threshold you can save in some other instruments.
Someone with a low risk threshold should save in a bank," he said.
The Finance Minister's remarks assume significance in the backdrop of a crash in the stock markets, led by bank scrips, that prompted RBI to cut Cash Reserve Ratio by 100 basis points to release about Rs 40,000 crore in addition to Rs 20,000 crore unlocked on Monday.
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As part of the global economy, India cannot stay away from the current market turmoil. Though the finance minister asserts that the banks were adequately funded to meet the crisis, this alone would not be sufficient to calm the investor worries and the market alike. Let us wait and see in a couple of weeks.
In order to restore depositors confidence, it is urgently required that indian Finance minister looks into adequately insuring those deposits, on similar lines of FDIC of USA. The Indian bank deposits are insured to trivial amount of 1 lac which is absolutely insufficient in current scenario. Compare this with other developed countries where deposits are fully insured. Even USA bank deposits are insured upto US$ 250,000 through FDIC. Why cant India government insure indian bank deposits at least upto 50 lacs per-deposit account? It would seriously boost depositors confidence in Indian banks.