As fears played havoc in the market, the Reserve Bank of India on Monday said it was ready to provide sufficient liquidity to banks for meeting all their payment obligations, including intra-day requirements.
The central bank said it was closely monitoring the developments in stock markets and other financial markets, including foreign exchange.
A task force has been constituted under S Gopinath, executive director, financial market committee RBI, for ensuring availability of liquidity, the apex bank said in a release.
"RBI has been in touch with major settlement banks and both stock exchanges (BSE and NSE) to ensure that payment obligations are met smoothly," it said.
On the foreign exchange market, RBI said: "It will continue to sell dollars through agent banks to augment supply in market or intervene directly to meet any demand-supply imbalances and all the transactions by RBI would be at the prevailing market rates.
Foreign institutional investors will no doubt continue to take their decision in regard to reducing or increasing their stake in Indian equity markets," it said.
While RBI welcomes these flows, it would also like to ensure that those FIIs, who wish to reduce the investment, can do so as easily as possible at the prevailing market rates.
As in the past, authorised dealers acting on behalf of the FIIs are free to approach the RBI to procure forex at prevailing market rates depending on market conditions, it said.