Frozen Credit Lines- RBI two steps too late..

RBI's announcement of a 150 basis point cut in the CRR has come in a bit too late. Already the pipelines carrying the credit system are clogged , even frozen some may say.  The Finance Ministry's assurance that they are 'watching'  the situation hour by hour cuts no ice,  pun intended.  Watching is no good in a market whose dynamics are changing by the second. PREMPTIVE ACTION is what is needed.  

Right now nobody trusts anybody else, me included. Iam moving my cash parked in Mutual Funds even in liquid funds to the sovereign security  of a nationalised bank . Everyone else around me is doing the same till the dust settles down.  People are doing this on the news/rumours that institutions /mutual funds are running from pillar to post to borrow, some borrowing at rates as high as 36 % to 54 %.

Opening up liquidity now will not help. Banks /Individuals will only hoard the excess liquidity as they are scared to let go and lend. What can ease this situiation ?  The government has to temporarily offer backing in the form of guarantees to major Banks, Financial Institutions and Mutual funds at least for the inter bank lending market.  If the Government is so confident of the financial health of ICICI Bank , now is the time to offer it gurantees in the the inter bank market.  If the fundamentals of the economy are sound and our exposure to the contagion in the west is so limited , why are we afraid to act ? 

What is at stake here is the financial health of the nation of which serious questions are being asked.  It is time for the Government to give strong and straight replies...