US Financial Crisis prompts RBI to announces market measures

16th September 2008- The recent extraordinary global developments triggered by the bankruptcy/sell-out/restructuring of some of the world's largest financial institutions have resulted in severe disruptions of international money markets, sharp declines in stock markets across the globe and extreme investor aversion.

Merrill Lynch agreed to sell itself to Bank of America for roughly $50 billion to avert a deepening financial crisis, and the top securities firm, Lehman Brothers, filed for bankruptcy protection after it failed to find a buyer.

These developments have also brought some pressures to bear on the domestic money and forex markets, in conjunction with temporary local factors such as advance tax outflows.

Reserve Bank of India has advised Lehman Brothers Capital Pvt. Ltd., a NBFC that it would need prior approval of RBI before contracting any direct/indirect liability from any institution in India or outside India or making any foreign currency remittance.

Lehman Brothers Fixed Income Securities Pvt. Ltd. a Primary Dealer has been advised not to declare any interim dividend or remit any amount to its holding company or any other group company without prior approval of RBI. Further, Lehman Brothers Fixed Income Securities Pvt. Ltd. has been advised not to undertake transactions in Government securities as a Primary Dealer in the primary market.

Further in order to alleviate these transient pressures which are related largely to external developments, the Reserve Bank has announced following Market Measures:

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