TEXT-Indian finance minister statement on latest steps

NEW DELHI, Oct 14 (Reuters) - India's Finance Minister Palaniappan Chidambaram said on Tuesday the central bank governor would meet the prime minister later in the day.

The meeting comes in the backdrop of a global financial crisis and various steps announced to improve liquidity in the banking system.

Following is the text of Finance Minister Palaniappan Chidambaram's statement:

---------------------------------------------------

"U.S. and European capital markets closed on a strong note last night. The East Asian markets have opened on a bright note this morning. It appears that the measures announced by various governments and central banks have not only infused greater liquidity into the markets but also helped restore confidence to a significant degree. I hope the same sense of optimism and confidence will be visible in Indian markets too.

Last night, it was brought to the notice of the government that some MFs faced some stress on liquidity in meeting redemption requirements in respect of debt instruments and money market instruments.

They sought a facility for accessing funds. Consequently, government requested SEBI and RBI to meet today and address the issue. This morning, chairman of SEBI met deputy governors of RBI. Later RBI heard key players in the mutual fund industry. Following these meetings RBI has announced a special 14-day repo (to commercial banks) at 9 percent for a sum of 200 billion rupees with a view to enabling the banks to meet the liquidity requirements of mutual funds.

The government welcomes this announcement. The government has been informed by the mutual fund industry that against the borrowing from the banks they will give as security, mainly, CDs (Reuters note: certificates of deposit) of the banks themselves. Chairman IBA is in touch with the banks as well as the MF industry to decide on an appropriate rate at which the banks will onlend to the MFs.

Governor RBI has returned to Mumbai. He has been requested to go over to Delhi this evening. The governor is scheduled to meet the PM later this evening." (Reporting by Surojit Gupta and Manoj Kumar; Editing by Charlotte Cooper)