New Delhi: India Wednesday took further steps to ease the flow of credit into the system, with as much as Rs.650 billion ($15.5 billion) being released to address the prevailing financial crunch, a development that industry "strongly" welcomed.

Earlier in the day, Finance Minister P. Chidambaram announced the release of Rs.25,000 crore (Rs.250 billion or $5.5 billion) for lending institutions to give as credit to the fund-starved industry. He also doubled the cap on foreign funds in the corporate bond market to $6 billion to address liquidity concerns.

Later in the evening, Reserve Bank of India (RBI) further cut the cash reserve ratio (CRR) by 100 basis points to 6.5 percent to release Rs.40,000 crore or Rs.400 billion (over $10 billion) into the system.

It had earlier cut CRR or the minimum balance banks have to maintain against deposits, to 7.5 percent. The central bank had over the past week reduced the cash reserve ratio, or the minimum cash banks have to maintain against deposits, by 150 basis points, to release Rs.200 billion into the financial system.

�The Reserve Bank of India has already issued an advisory to banks to enable smooth flow of credit to the borrowers of term loans as well as working capital,� Chidambaram said at a hurriedly convened press conference in the morning.

He said out of the money being released, the National Bank for Agriculture and Rural Development (Nabard) will get Rs.175 billion, while the rest will go to commercial banks.

"There will be no requirement of providing collateral."

The amount, Chidambaram said, was being issued against the waiver of farm loans worth an estimated Rs.710 billion announced in February to bail out nearly four million small and marginal farmers across the country.

While announcing the hike in the limit for foreign funds in corporate bonds, the finance minister said the market watchdog will also address requests for relaxing the ratio of investment in equity and debt that companies are required to maintain.

"After identifying liquidity as the main problem that has constrained the Indian financial system, a number of measures were taken between Oct 6 and today (Thursday). These measures have infused considerable additional liquidity into the market."

Chidambaram said RBI Governor D. Subbarao, with whom he and Prime Minister Manmohan Singh reviewed India's liquidity conditions Tuesday evening, was also expected to announce more measures in the coming days.

Chidambaram Wednesday said it was agreed at the meeting that credit to borrowers must be ensured at least to the extent of sanctioned amounts.

"The prime minister reviewed the financial situation, with particular reference to the liquidity position. The developments in, and measures taken by, other countries were also reviewed."

It was noted at Tuesday's meeting, also attended by Planning Commission Deputy Chairman Montek Singh Ahluwalia, that inter-bank lending remained a constraint.