The global financial crisis has raised concerns in certain quarters in India about an impending credit squeeze on the back of reports of lenders tightening their fists and freezing up credit.

K V Kamath, president of the Confederation of Indian Industry, sought to allay fears of a credit squeeze and informed that lenders will be loosening their purse strings to infuse more credit in the market in the wake of the reduction in interest rates. 

''We will have to go back to customers to get back to growth,'' said Kamath, who is also the chief executive of ICICI Bank.

Elaborating on the current scenario, he said that arbitraging was one of the reasons for the financial crisis. However, the factors responsible for the crisis did not exist in India. He noted that even though it is well insulated from the global crisis, the Indian financial sector was feeling the heat.
 
He said the Indian financial sector was much cleaner than the global financial system, adding that the current confidence erosion among industry was 'understandable'. He cited the hardening of interest rates and liquidity squeeze as reasons for this.

Keeping confidence level high is important in the current global situation, and this is the biggest challenge facing the country, he said. However, he expressed confidence that despite the global recession, India would continue to grow at around seven per cent in the current fiscal. He projected a growth rate of six per cent during 2009-10.

He further added that the next few weeks will see the Indian industry work out strategies to counter the global challenges and pointed out that the domestic market will be increasingly driving the Indian economy. He said that de-leveraging, cost cutting and weakening commodity prices will marginally impact economic growth.