No liquidity crunch due to 3G auction: RBI

The Reserve Bank of India on Thursday sought to allay fears of a possible liquidity crunch arising from credit outgo to telecom companies which have bid for 3G spectrum for a mammoth over Rs 67,000 crore (Rs 670 billion).

RBI Governor D Subbarao said there was no possibility of the general liquidity getting affected and banks can lend credit to telecom companies as part of this process.

The auction for 3G mobile licence closed on Wednesday, leaving the government with revenue windfall of Rs 67,710 crore (Rs 677.1 billion) -- nearly twice the amount projected in the Budget.

Speaking to reporters after a RBI board meeting in Thiruvananthapuram, he said the central bank fully supported lending educational loans by banks.

However, it was the responsibility of managers to ensure that the loans were recouped. For this, each application had to be scrutinised on the basis of eligibility.

To a question on the spread of counterfeit currency, he said there was no foolproof system to prevent the menace, but RBI had taken all possible measures to check it.

The meeting focussed on increasing the flow of credit to small and medium enterprises and refinancing the co-operative sector adequately.

The RBI Governor, who met Kerala Chief Minister V S Achuthanandan, proposed steps to include the basic principles of finance as part of the school curriculum.

Subbarao supported the Kerala govenment's plan to modernise the treasury system and introducing ATM facility for treasury bank account holders.