IMF The International monetary Fund works as :I. Increasing international monetary cooperation. II.

Promoting the growth of trade. III. Promoting exchange rate stability. IV Establishing a system of multilateral payments, eliminating exchange restrictions which hamper the growth of world trade, and encouraging progress towards convertibility of member currencies. V.Building a reserve base. In the current prices, IMF has issued bail out packages of many countries slashing economy like Iceland US$ 6 billion, Pakistan 9.6 billion. The Job Scenario :1. The job scenario changed drastically in last one year and all because of above financial muddle. Banking sector already gone with this mess, because the crisis starts only because,with,from the banks,all the big banks of world are facing problem. 2. All the export oriented industries jewellery,textile,handicrafts and many more,all suffering from liquidity crunch around the world.Low demand, low sales, low revenue, low profits simply means to stand by in present scenario cost cutting is only way and this cost cutting converts into no new recruitment at all,even in some sectors out way to the non performer employees. India : The liquidity crunch :1 . Increase in banking rates :- To control the inflation RBI made a cut in all its key lending and policy rates like CRR,SLR,Repo,Reverse Repo etc. which strengthen the liquidity crunch. 2. FII money pull out :-As I already explained how FII pulled out their money from India and other part of world stock market.But in this money pulling the real looser is not the FII but the small investor because FII pulled out their huge money in bull rally,and leave the small investor in the bear market with huge stock market fall. 3. Backing of FDI :- USA has 17.08% share in FDI inflows to India, The US investor community was sharing confidence in the future of the Indian economy. Several areas like infrastructure, IT, Telecom sector, energy and other knowledge industries such as pharmaceuticals and biotechnology, possess immense potential for progressing economic

cooperation between India and the US. On investment front, USA covers almost every sector in India, which is open for private participants. Both government-to-government level and business-to-business level conduct regular interactions with each other to promote and strengthen the trade and economic interactions between the two countries. FDI in banking is permitted up to 49%. US Success stories in this sector include Citicorp, GE Capital, and American Express. The insurance sector in India is opened up for up to 26% FDI. However, there are proposals to hike this limit to 49%. US companies that have successfully entered this field in India include New York Life, AIG etc. A very important aspect of US India economic relations comes with the emergence of Business Process Outsourcing, where in many US companies are reaping the advantages offered by India's IT sector.India offers a large pool of trained, English speaking personnel, which offers huge cost benefits to the US MNCs. 4. Export decrease :- India's sizable population and growing middle and higher income class makes India a potentially large market for U.S. goods and services. According to the figure from government sources, U.S. exports to and imports from India in 2003, totalled US $5.0 billion and US $13.1 billion, respectively. India's main exports to US are precious stones, metals (worked diamonds & gold jewellery), Woven apparel, Knit apparel, miscellaneous textile article, Fish and seafood (frozen shrimp), Textile floor coverings, Iron/steel products, Organic chemicals and Machinery (taps, valves, transmission shafts, gears, pistons, etc). Among the major multi national corporations of USA that are doing a profitable business in India are- General Electric, Whirlpool Ford (India), 3M, Tecumseh Products (India) Limited, Pepsi, Proctor and Gamble (India), Microsoft, Intel, IBM Corporation, EDS, Sun Microsystems, Adobe Systems Inc, Agilent Technologies Inc, Oracle Corporation, Texas Instruments. 5. Panicing environment :This is not that much fundamentals of liquidity crunch effect the market but the influencing panic environment all over the country. The investor don't want to invest his money into any asset class because he don't perceive his money safe in any asset class by investing it to any asset class rather he belives best to keep his money safe in his bank account. RBI Measures

To improve liquidity and check depreciation of rupee, finance ministry relaxed norms to allow companies in the mining, exploration and refineries sectors to bring in up to $500 million in external commercial borrowing (ECB) to the country for rupee expenditure. The earlier limit was $50 million. 20 Oct 2008 (RBI) slashed its key lending rate by 100 basis points to 7.5 percent. 1Nov, 2008, CRR cut by 350 basis points to 5.5 per cent,. This measure will release additional liquidity into the system of the order of Rs 48,000 crore. Nov. 1, 2008, To reduce the repo rate or its main short-term lending rate by 50 basis points to 7.5 percent. Again both repo cut made a liquidity of 40000crore Rs. into system. Increased interest rates on Non-Resident deposit schemes by 50 basis points, or 0.5 per cent As a temporary measure, banks permitted to avail of additional liquidity support under the LAF to the extent of up to 1 per cent of their NDTL. The mechanism of Special Market Operations (SMO) for public sector oil marketing companies instituted in June-July 2008 taking into account the extraordinary situation then prevailing in the money and forex markets will be instituted when oil bonds become available. Under the Agricultural Debt Waiver and Debt Relief Scheme Government had agreed to provide to commercial banks, RRBs and co-operative credit institutions a sum of Rs.25,000 crore as the first instalment. At the request of the Government, RBI agreed to provide the sum to the lending institutions immediately. Interest rates on FCNR (B) Deposits and NRE(R)A deposits were increased by 100 basis points each to Libor/Euribor/Swap rates plus 25 basis points and to Libor/Euribor/Swap rates plus 100 basis points, respectively. Banks allowed to borrow funds from their overseas branches and correspondent banks up to a limit of 50 per cent of their unimpaired Tier I capital as at the close of the previous quarter or USD 10 million, whichever is higher, as against the existing limit of 25 per cent. Special 14 days repo to be conducted every day upto a cumulative amount of Rs.20,000 crore with a view to enabling banks to meet the liquidity requirements of Mutual Funds. Purely as a temporary measure, banks allowed to avail of additional liquidity support exclusively for the purpose of meeting the liquidity requirements of mutual funds to the extent of up to 0.5 per cent of their NDTL. Under the existing guidelines, banks and FIs are not permitted to grant loans against certificates of deposits (CDs). Furthermore, they are also not permitted to buy-back their own CDs before maturity.

It was decided to relax these restrictions for a period of 15 days effective October 14, 2008, only in respect of the CDs held by mutual funds. These above are some measures which RBI has taken to face the world crises on India with a special effect of liquidity crunch and inflation at a time.